Setting up a limited company in the UK is one of the most effective ways to structure a business. It separates your personal finances from your business, can reduce your tax liability, and gives your business a professional, credible identity. But the process involves several steps, and getting them right from the start saves significant time and cost later.

This guide walks you through exactly what is involved.

What is a UK Limited Company?

A limited company is a legal entity that is separate from its owners. This means the company can own assets, enter contracts, and incur debts in its own name. If the company runs into financial difficulty, the personal liability of its shareholders is limited to the value of their shares — hence the term "limited."

The most common type is a private company limited by shares (Ltd), which is what most small business owners and sole traders incorporate as.

Step 1 — Choose a company name

Your company name must be unique and not too similar to an existing registered company. You can check availability on the Companies House register. The name must end in "Limited" or "Ltd."

Avoid names that are misleading, offensive, or that imply a connection to government. Certain words — such as "Royal," "Bank," or "Institute" — require special permission to use.

Step 2 — Appoint directors and shareholders

Every limited company must have at least one director. Directors are responsible for running the company and ensuring it meets its legal obligations. Directors must be at least 16 years old and must not be disqualified from acting as a director.

Shareholders own the company through their shares. In a small owner-managed business, the director and sole shareholder are often the same person.

Step 3 — Prepare your articles of association

The articles of association are the rules that govern how the company is run. Most small companies use the standard "model articles" provided by Companies House, which are suitable for straightforward structures. If you have multiple shareholders or a more complex arrangement, you may want bespoke articles drafted.

Step 4 — Register with Companies House

You register your company online through Companies House. As of 1 February 2026, the standard online registration fee is £100 (up from £50), with same-day digital registration available for £156. Postal registration using form IN01 costs £124 and takes 8–10 working days. Online registration is typically processed within 24 hours. You will need:

  • Your chosen company name
  • A registered office address in the UK (this will be publicly visible)
  • Details of directors and shareholders
  • Your articles of association
  • A statement of capital (how many shares exist and their value)

Once registered, you will receive a Certificate of Incorporation and a unique Company Registration Number (CRN).

Step 5 — Register for Corporation Tax

You must register with HMRC for Corporation Tax within three months of starting to trade. Corporation Tax is currently charged at 19% on profits up to £50,000, rising to 25% on profits above £250,000, with marginal relief in between.

Step 6 — Set up a business bank account

A separate business bank account is essential. It keeps your personal and business finances clearly separated, which simplifies your accounting and is required for a properly run limited company.

Step 7 — Understand your ongoing obligations

Running a limited company comes with ongoing legal requirements:

  • Filing annual accounts with Companies House
  • Submitting a Confirmation Statement each year (£50 online, since February 2026)
  • Filing a Corporation Tax return with HMRC
  • Maintaining statutory registers (records of directors, shareholders, and significant persons with control)
  • Complying with Companies House ID verification requirements (introduced under the Economic Crime and Corporate Transparency Act)

Missing these deadlines results in automatic penalties and, in serious cases, the company being struck off the register.

Common mistakes to avoid

The most frequent errors made by new company directors include: using a personal bank account for business transactions, missing the Corporation Tax registration deadline, failing to keep proper records of decisions made by directors, and misunderstanding the distinction between salary and dividends.

Where to go from here

If you want a complete, plain-English walkthrough of the entire formation process — including the Companies House ID verification requirements, how to structure your shares, what your articles of association should say, and how to stay compliant in your first year — the Complete UK Limited Company Formation Guide covers every step in detail.

Get the UK Limited Company Formation Guide →

📖 Also available on Amazon: Kindle | Paperback

Summary

Setting up a UK limited company involves choosing a name, appointing directors and shareholders, preparing articles of association, registering with Companies House, and meeting your ongoing tax and filing obligations. Done correctly, incorporation gives your business a solid legal foundation and meaningful financial protections.

This article is for informational purposes only and does not constitute legal or financial advice. Always verify current requirements with Companies House and HMRC, and seek professional advice where appropriate.