Home Working in the UK Self-Employment Starting a business in the UK
Last update on October 20, 2020

If you’re planning to join the community of UK entrepreneurs and launch a start-up business of your own you will need to join the company register UK and develop your business ideas to suit your target audience. This guide offers tips to those looking to become self-employed in the UK.

Being self-employed in the UK is fairly common with around 15% of the workforce registered as self-employed. If you have moved to the UK from overseas, self-employment in the form of starting up a business, UK, or becoming a freelancer is something you might want to consider.

This guide will cover the main points of starting a business in the UK and look at the different types of legal structure for UK companies. It will also cover topics such as the situation for sole traders and freelancers in the UK, levels of taxation, and employing foreign staff.

How to start a business in the UK

If you want to become self-employed or start a business in the UK as a foreigner, you’ll need to go through the following steps:

1. Check that you can legally go about starting your own business in the UK

You’ll need to make sure that your immigration status allows you to work as a freelancer in the UK. For non-EU/EFTA nationals, this may mean ensuring that you have the necessary visa and residence permit. See the below section on business visas for more information.

2. Write a business plan

UK entrepreneurs need a business plan. This will help you determine whether your business ideas for the UK are likely to succeed and be sustainable. You’ll need to research the market and also prepare budget forecasts. You can download business plan and cash flow forecast templates from the UK government website here.

3. Decide on your business legal structure

Do you want to become a sole trader, partnership, limited company, or just a freelancer? See the below section on UK business types for details.

4. Choose a business name and address

If you’re a sole trader, you can just use your own name if you want. You’ll need an address for when it comes to registering your UK business for tax purposes and joining the company register in the UK. Only limited companies need to register their name, although others can register as a trademark to stop anyone else from trading under the name. (You can use an online self-employed tax calculator UK here.)

5. If you are a UK entrepreneur setting up as a Limited Company

You will need to appoint directors and a company secretary, work out your shares and shareholders, write your memorandum and articles of association, open a separate bank account and register for corporation tax.

6. Register with HM Revenue and Customs

You will need to register your UK business with HMRC for tax purposes. Limited Companies need to register with Companies House at the cost of £12 (online) or £40 (post).

7. Check if there are any additional rules for your type of start-up business UK

Depending on the nature of your UK business, there may be additional requirements, such as:

  • licenses or permits (e.g., to sell food or alcohol, play music, or trade in the street)
  • insurance
  • rules to follow if you buy or sell goods abroad or store/use personal information
Company register UK

Once you have completed these steps, you can concentrate on getting your business up and running.

Starting a business in the UK: types of business

There are a variety of different UK business types. You’ll need to choose from the following whichever one is most appropriate for you:

Sole trader

This is the option if you want to work as self-employed in the UK or run a business on your own. See the below section on freelancers and self-employed for more information.

General partnership

A UK business type involving two or more individuals (or companies). Responsibility for the business is shared equally between partners, profits are shared equally and each partner pays tax on their share and is jointly liable for debts and losses. This is often suitable for small businesses in the UK.

Limited partnership

A limited partnership operates similar to general partnerships but have at least one ‘general’ partner who runs the business in the UK and is personally liable for any business debts, and at least one ‘limited’ partner whose input is purely financial and who is only liable up to the amount contributed.

A limited liability partnership (LLP)

Partnership agreement where each partner is not personally liable for debts that the UK business can’t pay. This partnership requires a written LLP agreement and needs to be registered at Companies house.

Private Limited Company (Ltd)

This is a UK business type that is a separate legal entity from the people that run it. Ltd’s are incorporated through registration at Companies House and need at least one director and one shareholder. Shares in the company cannot be traded publicly.

Public Limited Company (PLC)

PLCs are UK companies that differ from Ltd’s in that their shares may be traded publicly. There needs to be a minimum share capital of £50,000 with at least 25% paid prior to start-up.

Unlimited company

A UK company type not that common, where shareholders have joint unlimited liability for business debts, meaning they can be covered with personal assets in the event of the business assets not meeting debts.

Social enterprise

This is a UK business type that exists to invest any profits made to meet charitable, social, or community objectives rather than to distribute among shareholders. They are structured similar to limited companies and include charities, cooperatives and community interest companies (CIC).

Unincorporated association

This is an unregistered, unincorporated form of non-profit organisation that can include voluntary groups, small community groups, and sports clubs.

Setting up an offshore company

If you are considering setting up an offshore company, i.e. one that is registered, established or incorporated outside of your country of residence, there are several major pros and cons you need to bear in mind.

Offshore incorporation is a straightforward process in all of the popular offshore financial centers and tax havens around the world. They can provide a wide range of benefits to the company and company principals.

You can read more about the pros and cons of setting up an offshore company, including privacy and reduced tax liability, in our helpful guide. This also explains how to register, establish, or incorporate your business outside of your country of residence.

Freelancers and self-employed sole traders starting a business, UK

Business ideas UK

You can become a sole trader if you want to start a UK business and run it as an individual. To do this, set up a business that you then trade as or simply by operating as a freelancer in the UK. You can keep all of your business profits but make your own arrangements to pay tax and National Insurance. You are personally liable for all business debts.

Freelancers in the UK are also sole traders. To work as a freelancer in the UK, all you need to do is to register as self-employed to make sure that you pay the right amounts of income tax and National Insurance.

Foreign companies registered in the UK

Overseas companies that want to operate as a business in the UK or open up a branch or subsidiary in the UK need to register as an overseas company with Companies House. If you have a business in another country and want to open up a branch of the business in the UK, you need to complete a form OS IN01 – ‘Registration of an overseas company opening a UK establishment’ and pay a £20 registration fee within one month of opening.

Business visas in the UK

You can work as a freelancer, self-employed, or start a business in the UK as long as you have the right to work in the UK. For non-EU/EFTA nationals, this may mean having a relevant work visa and biometric residence permit. See our guide to UK visas and residence permits and our guide to UK work visas for more information.

Self employed tax calculator UK

If you’re looking to start a business in the UK, there are a number of Tier 1 work visas:

  • Entrepreneur visa UK – if you have at least £50,000 of investment funds and want to set up a business in the UK
  • Graduate entrepreneur visa UK – if you have graduated and have a business idea you would like to pursue, you can apply for endorsement from the UK Department for International Trade or a higher education institution.
  • Investor visa – if you have £2 million to invest in the UK economy

Taxes and accounting when starting your own business UK

All UK businesses and UK entrepreneurs need to register with HMRC for tax purposes and are responsible for submitting their own tax returns. Self-employed sole traders and those in partnerships pay taxes on business profits. Limited UK companies and foreign companies with UK branches also need to register for Corporation Tax. The rate of UK Corporation Tax is 20% on profits minus any allowances and relief.

UK businesses will also need to register for VAT if their annual turnover is more than £83,000 and may need to pay Capital Gains Tax if business assets are sold at a profit.

The UK tax year runs from 6 April. Tax returns have to be submitted and any tax owed paid by 31 January following the end of the previous tax year.

All UK businesses must keep a record of their accounts for tax and auditing purposes. Self-employed freelancers don’t need to keep official accounts but do need to keep a record of income and tax-deductible expenses. Limited companies, social enterprise companies, and registered charities will have to have a separate UK business bank account. Partnerships and sole traders aren’t legally required to have separate business accounts. However, it is a good idea to do so in order to keep accounting processes simple.

An online self-employed tax calculator UK can be found here.

Information on business tax is available on the UK government website here.

Employing foreign staff when you’re starting a business UK

If you are starting up a UK business that employs staff, there are a number of things you need to do including registering as an employer with HMRC and getting employers liability insurance.

You can employ foreign staff in your UK business as long as they have the legal right to work in the UK. For non-EU/EFTA nationals, this may mean having a relevant work visa and residence permit. You can check if someone is eligible to work in the UK here.

Business support for UK entrepreneurs

You can get help and support for your UK business from a number of schemes specializing in different areas, including help with finances, taxation, and business planning. UK business start-up costs vary depending on several factors but there are various sources of support in terms of UK business grants and loans.

Entrepreneur visa UK

Contact details for government business helplines in England, Scotland, Wales, and Northern Ireland can be found here.

A list of government-backed support schemes and UK business grants can be found here.

Information on start-up loans for UK businesses can be found here.

Business lawyers for UK entrepreneurs

It is a good idea to get legal help if starting up a business in the UK to help make the process as smooth as possible. The Law Society can provide advice on setting up a business as well as helping you find a solicitor. You can find out more here.

Further information