How to Set Up a Limited Company in 2026: Costs, Steps and Tax Setup

To set up a limited company you verify your identity with Companies House, then incorporate the company online for a £50 fee — usually approved within 24 hours. After that you register for Corporation Tax within three months of starting to trade, add PAYE if you will pay yourself or anyone else a salary, and open a business bank account in the company's name.

The identity step is the part that trips people up. Since the Economic Crime and Corporate Transparency Act reforms took effect, every new director and person with significant control must be verified before the company can be registered, so it is the first thing to sort out, not the last.

Key points

• Online incorporation costs £50; same-day and paper routes cost more.
• Identity verification is now compulsory for new directors and PSCs, and it is free if you do it directly with Companies House.
• Register for Corporation Tax within 3 months of starting business activity; PAYE before your first payday.
• Corporation Tax is 19% on profits up to £50,000 and 25% above £250,000, with marginal relief in between.
• Dividends carry a £500 allowance, then 10.75%, 35.75% or 39.35% depending on your income band.

Before you start: is a company the right wrapper?

A limited company is a separate legal person. Its profits belong to it, not to you, and you extract money as salary, dividends or repayment of a director's loan. That separation brings limited liability and often a lower overall tax bill at higher profits, but it also brings annual accounts, a confirmation statement, a Corporation Tax return and public disclosure of your directorships.

Run the numbers before you incorporate. Our sole trader vs limited company calculator compares the two on your actual profit figure, and the short sole trader or limited company decision guide walks through the non-tax factors such as admin load, IR35 and how you plan to take money out.

Decisions to make first

• Company name — must be unique, must end in "Limited" or "Ltd", and cannot use sensitive words without permission. Check availability on the Companies House register first.
• Registered office address — must be an "appropriate address" where post can be delivered and acknowledged, and it appears publicly. A home address is allowed but is then on the public record.
• Registered email address — every company must supply one for Companies House correspondence. It is not published.
• Directors and shareholders — at least one director aged 16 or over, and at least one share issued. Many small companies issue 100 ordinary £1 shares, but one £1 share is perfectly valid.
• SIC code — the code describing what you do. Pick the closest match; you can change it at the next confirmation statement.
• Articles of association — the standard model articles suit most one or two-person companies.

Registering the company with Companies House

You register a company through the Companies House online service at gov.uk/limited-company-formation. You will need the details above plus three pieces of personal information for each officer (for example town of birth, mother's maiden name, last three digits of a phone number) used as a security check, and each person's verified identity code.

What it actually costs

Formation agents bundle incorporation with a registered office, a company secretary service or a bank introduction. That is convenience, not a requirement — the underlying filing is the same £50. Accountancy fees for a small company's year-end accounts and CT600 vary widely by region and complexity, so get two or three quotes rather than relying on a headline figure.

Companies House ID verification: do this first

Identity verification is the biggest change to company formation in years. Anyone becoming a director or a person with significant control (PSC) of a new company must have a verified identity before the incorporation can go through, and filing on behalf of a company now generally requires the filer to be verified too.

There are two routes:

1. Direct with Companies House — free. You use GOV.UK One Login and either a photo ID check on your phone, a document upload, or an in-person check at a Post Office branch. You are issued a personal code that you quote on every filing and for every company you are involved with.
2. Through an Authorised Corporate Service Provider (ACSP) — an accountant, solicitor or formation agent registered with Companies House can verify you and confirm it on your behalf. They charge for this.

Two points worth planning around. First, the code belongs to you, not to the company, so you only verify once however many companies you run. Second, existing directors of companies incorporated before the rules changed are being brought in through a transition period, with verification confirmed at the next confirmation statement. If you are already a director elsewhere and have verified, you can reuse the same code for the new company.

Practical tip: verify every director and PSC before you open the incorporation form. If one person is unverified, the whole application stalls.

Corporation Tax, PAYE and VAT registration

Companies House tells HMRC that your company exists, and HMRC posts a Unique Taxpayer Reference to the registered office, normally within a couple of weeks. You then have to register the company for Corporation Tax yourself at GOV.UK within three months of starting any business activity — which includes advertising, buying stock or taking on staff, not just invoicing.

The Corporation Tax calendar then runs on three separate clocks:

• Payment — 9 months and 1 day after the end of the accounting period.
• CT600 return — 12 months after the end of the accounting period.
• Companies House accounts — 21 months after incorporation for a first set, then 9 months after each year end.

PAYE

If you will take a salary — even a director-only one — you need a PAYE scheme. Register at gov.uk/register-employer before the first payday; the employer reference typically arrives within about five working days, and you cannot register more than two months ahead of your first payment. Employer's National Insurance is 15% on earnings above the £5,000 secondary threshold, and employees pay 8% between £12,570 and £50,270, then 2%. The Employment Allowance can offset employer's NI, but a company whose only employee is a single director cannot claim it.

VAT

Registration becomes compulsory once taxable turnover passes £90,000 in any rolling 12 months, or if you expect to pass it in the next 30 days alone. You can register voluntarily below that if most of your customers are VAT-registered businesses. Details are at gov.uk/vat-registration.

Worked example: £60,000 of company profit

A single-director company with £60,000 of profit before any salary, paying a £12,570 salary and the rest as dividends:

The salary is covered by the £12,570 Personal Allowance and sits at the employee NI threshold, so it carries no income tax or employee NI. The dividends fall inside the £37,700 basic-rate band, so only the 10.75% ordinary rate applies. Dividend tax rates are the same across the UK, so a Scottish taxpayer's figures here are identical — Scottish rates apply to non-savings income such as salary, which matters once you pay yourself more than the Personal Allowance.

Bank account and bookkeeping

Company money is not your money. Open a business bank account in the company's name and keep every transaction out of your personal account, because mixing the two is the fastest way to create an overdrawn director's loan account and an unexpected tax charge. Banks will ask for your incorporation certificate, proof of identity for each director and details of the company's activity.

From day one, keep:

• Sales invoices and receipts for every purchase, retained for six years.
• A record of dividends, supported by a board minute and a dividend voucher for each payment — dividends can only be paid out of retained profits.
• A director's loan account showing money you put in and take out.
• Payroll records if you run PAYE, with a Full Payment Submission filed on or before each payday.

One reassurance: Making Tax Digital for Income Tax, which starts in April 2026 for sole traders and landlords with gross income over £50,000, does not apply to limited companies. Companies file accounts and a CT600 instead. Companies House is, however, moving accounts filing to software-only submission, so cloud bookkeeping is worth setting up early rather than retrofitting.

What to do next

Before paying the £50, check the arithmetic on your own profit level with the sole trader vs limited company calculator, which shows the total tax and take-home under each structure. If you are still weighing the admin and risk side, read the sole trader or limited company guide, then verify your identity with Companies House so the incorporation itself takes minutes rather than days.