You’ve conceived a business idea and you’ve crafted your plan for the year ahead. You may even be working on your dream business plan right this moment. Or, you may just be wondering how to register a new business in the UK. If any of the above apply, we’ve written this guide to help you.
Whether you’re registering as a limited company or want to know how to register a business name - this blog post should serve as a comprehensive guide on how to register a business.
Contents and key links
- Why is it important to register a business?
- When do you have to register a business?
- How to register a business (UK)?
- How to register a business name?
- How much does it cost to register a business?
- Registering as a sole trader
- How to register as a limited company
- Registering as a business partnership
Why is it important to register a business?
In the UK it’s a legal requirement to register your business. You’ll also need to make sure you register correctly to be recognised as a business. This is essential for a variety of reasons included tax and employment. The level of registration required depends on the size of your business like how many employees you have or plan to have.
With many also opting to start remote businesses and 16% of global businesses operating on a fully-remote model, it’s key to know whether you’re registering a business on premises or as an at-home business.
You may also have to register for other licences related to your business. For example, if you’re signing up for a music venue, you will also need to register for a music licence. If you’re embarking on a restaurant venture, you will also need to apply for insurance.
Regardless of your type of business, you will need to register with HMRC so that you can start paying taxes and completing tax returns. You will also need to start paying VAT depending on the scale and taxable turnover of your business.
When do you have to register a business?
So it’s decided - you’re going to register your business. But now you need to work out when you have to register as a business in the UK. If one of the below applies to you or will apply to your business in the imminent future, you need to start the registration process to avoid any legal repercussions:
- Products, goods or services have been bought or sold.
- You’ve gained an income and a profit is made.
- Specific items have been bought from wholesalers to sell and make a profit.
- Trading activities have taken place.
- You are taking out business insurance.
- You are starting to employ staff to run your business.
- You are earning more than £1000 per tax year from your business.
Are you earning money from your business, but it is less than £1000 per year? If so, according to HMRC, you do not need to register as a business at this time. But it’s still worth understanding how to register when the time comes so keep reading.
How to register a business UK
The nature of your business and your business structure will dictate how registration should be done. By business structure we just mean what type of legal business are you running for example the business structures you can register under are:
- Registering as a sole trader
- Registering as a limited company
- Registering as a business partnership
You must be sure to choose the correct business structure as this affects how you pay yourself and any employees you plan to take on. Let’s dive a bit deeper into the definitions of these business types so you can make an informed decision.
Define sole trader
The definition of a sole trader is someone who runs their own business, is self-employed and works for themselves. This means you can keep all of your business profits once you have paid taxes.
However, you are solely responsible for any losses your business makes. You also must be sure to follow any rules HMRC outlines regarding running or naming your business.
Do I qualify as a sole trader?
According to HMRC, you should register as a sole trader if:
- You earned more than £1,000 from self-employment between 6 April 2021 and 5 April 2022.
- You need to claim Tax-Free Childcare and thus prove that you are self-employed.
- You have decided that you want to make voluntary Class 2 National Insurance payments. This is to mainly help you qualify for benefits.
How to register a business as a sole trader
First, you need to let HMRC know that you will pay tax through a Self Assessment. This means you will be tasked with filling out and filing a tax return every year. You can register for a Self Assessment here.
If you decide to register your business as a sole trader you will also need to:
- Keep an extensive list of business records and record expenses.
- Send a Self Assessment tax return to HMRC every year before the deadline.
- Start paying Income Tax on your profits.
- Begin paying Class 2 and Class 4 National Insurance.
- Apply for a National Insurance number. This is only if you are moving to the UK to set up your business.
If you are working in the construction industry as a contractor or a subcontractor, you will also need to register for the Construction Industry Scheme.
Define limited company
A limited company is one where a business is free to arrange contracts in its name.
Registering as a business limited company may be a good idea if you want your company to be legally separated from its owners. This means that shareholders, partners and employees are not responsible for any debts the company may incur. Instead, the business itself is responsible for paying its debts.
It should also be mentioned that you have to pay yourself a salary. When you run a limited company you cannot just draw money from the business account.
For your business to become a limited company, you must register it with Companies House.
How to register a new business as a limited company
Setting up a limited company in the UK is trickier than setting up a sole trader business. Lots of limited company owners employ an account to help them set up their UK business. However, you can also do this yourself by following these steps:
- You first have to register for and set up a business account with HMRC.
- You then have to register the business with Companies House which you can do on the GOV website.
- You’ll need to choose a company director.
- Assign how shares are being allocated.
- Create company rules. These include A ‘memorandum of association’ and ‘articles of association’. More information can be found here.
- Check what records need to be kept.
How to register as a limited company with Companies House
When you register with Companies House, you need some specific information to hand.
- Your limited company name
- The details of the chosen director
- The limited companies’ business address
You will also need to supply three pieces of personal information to Companies House. This is so that your identity can be proven.
At the time of publishing, you can supply anything from the below list:
- The town you were born in (listed on your birth certificate
- Your father’s first name
- Your National Insurance number
- Your mother’s maiden name
- Your passport number
- Your phone number
Define a business partnership
The definition of a business partnership is that you and your partner share responsibility for your business. This means you are responsible for any losses that your business makes. You are also in charge of paying the bills for anything you buy for the business. This includes equipment and technology.
It’s also worth mentioning that a business partnership shares business profits. However, this is not always an equal share. Elsewhere, each partner is responsible for paying taxes on their share.
If the business itself has a taxable turnover that breaks the threshold (£85,000) - the business must begin to make VAT payments.
Registering as a business partnership
How to register a new business partnership, in just a few steps:
- Choose a name for your business partnership
- Choose a name for your business
- Select a ‘nominated partner’. This is who is responsible for managing the tax returns and business records.
- Register your business with HM Revenue and Customs
Registering a business name
How you register a business name depends on the nature of your business and the business structure. In this part of the guide we’re going to cover the limitations that come with registering a business name, depending on how you choose to register your UK business.
What can’t you include in your Sole Trader business name?
Sole trader names must not:
- Include ‘limited’, ‘Ltd’, ‘limited liability partnership’, ‘LLP’, ‘public limited company’, or ‘plc’
- Be offensive in any which way
What can you include in your limited company name?
You can include almost anything in a limited company name. However, you will need to check if the name is available. You can do this by heading online and entering the desired business name into the Company Name Availability Checker at Companies House. Once approved, you can click the link and register the name as a ‘private limited company online'.
What can you include in your business partnership name?
In a business partnership, you can either trade under your name or you can select another name for the business. However, you must include the business name and all of the partners’ names on the paperwork. This includes letters, contracts and invoices.
What can’t you include in your business partnership name?
Much like a sole trader, your business partnership name cannot include:
- ‘limited’, ‘Ltd’, ‘limited liability partnership, ‘LLP’, ‘public limited company’, or ‘plc’ in the name
- Any offensive language
- Any existing trade mark
The cost of registering as a business
Sole trader costs
Setting up a business as a sole trader has no costs. The only costs will come from accounting and tax liabilities.
Limited company costs
Registering for an HMRC account is free. Registering your business as a limited company with Companies House costs £12. This can be paid via debit or credit card.
Business partnership costs
Much like registering as a sole trader, there is also no cost to setting up a business partnership.
For more business tips, also visit the Dojo blog.