Setting up a business in the UK is more straightforward than many people expect. You can often start trading within days. The harder part is choosing the right structure and keeping on top of your tax and paperwork from the beginning. This is our practical overview of the first decisions and the official steps.
First, check your visa allows it
Before anything else, if you are in the UK on a visa, make sure it permits the work you are planning. Some visas restrict self-employment heavily:
- Student visa: GOV.UK states plainly that you cannot be self-employed.
- Skilled Worker visa: you may do up to 20 hours a week of extra work, which can include your own business, but only if that work meets the occupation conditions on the GOV.UK additional work page, and you must keep doing your sponsored job. Business admin such as invoicing counts towards the 20 hours.
- Health and Care Worker and other routes have their own conditions, so read the page for your visa carefully.
Breaching your visa conditions can have serious consequences. This article is general business information, not immigration advice. Only advisers regulated by the Immigration Advice Authority (formerly OISC) or solicitors can give immigration advice, and you can find a regulated adviser on GOV.UK.
Sole trader or limited company?
These are the two most common structures for a new small business.
Sole trader
You and the business are legally the same. It is the simplest to set up and run: no registration with Companies House, fewer filing duties, and you keep the profits after tax. The trade-off is unlimited liability, meaning you are personally responsible for business debts. GOV.UK has a clear guide to setting up as a sole trader.
Limited company
The company is a separate legal entity. Your personal liability is generally limited to what you put in, and some clients prefer dealing with a company. In return, you take on more responsibility as a director: annual accounts, a confirmation statement, Corporation Tax, and keeping company records up to date. Profits belong to the company, and how you pay yourself has tax implications worth discussing with an accountant.
Many people start as a sole trader to test an idea and incorporate later once income grows. There is no single right answer, so weigh liability, admin time and how you will take money out.
Registering as a sole trader
You can start trading before you register. However, you must register for Self Assessment with HMRC if your self-employed income is more than £1,000 in a tax year (6 April to 5 April). The deadline is 5 October after the end of the tax year in which you started. For example, if you began trading in the 2025 to 2026 tax year, you need to register by 5 October 2026 or risk a penalty.
Be aware of Making Tax Digital for Income Tax. From 6 April 2026, sole traders and landlords with qualifying income over £50,000 must keep digital records and send quarterly updates using compatible software. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028. Check whether it applies to you.
Setting up a limited company
You incorporate through Companies House. The online incorporation fee is currently £100, with a higher fee for paper applications; see the Companies House fees list for current figures.
A major change came in on 18 November 2025: identity verification. New directors and people with significant control must now verify their identity, either through GOV.UK One Login or through an authorised corporate service provider. Once verified, you receive a personal code to use when you are appointed. Existing directors are being brought in as they file their confirmation statements.
After incorporating, set the company up for Corporation Tax with HMRC. You can often do this as part of the incorporation process or add it afterwards through your business tax account.
Open a business bank account
A limited company needs its own bank account, because the company’s money is not yours. Sole traders are not strictly required to have one, but keeping business and personal money separate makes record keeping, tax returns and any HMRC enquiry much easier. Compare a few providers on fees and how they verify your identity and address.
Keep good records from day one
Whatever structure you choose, you must keep records of your income and expenses, with receipts and invoices. A simple spreadsheet works at the start, but if Making Tax Digital is likely to apply to you, use compatible software early so the switch is painless. Set aside a percentage of every payment for tax so the bill does not catch you out.
VAT
You must register for VAT if your VAT-taxable turnover goes over £90,000 in a rolling 12-month period, or you expect it to in the next 30 days. You can also register voluntarily below that level. The GOV.UK VAT guidance explains how turnover is counted.
Insurance and licences
Employers’ liability insurance is a legal requirement as soon as you employ someone, with limited exceptions. Other cover, such as public liability or professional indemnity, is optional in law but often expected by clients. Some trades also need licences or checks, for example if you work with children or vulnerable adults, sell food or handle waste.
Before you start
- Confirm in writing that your visa permits self-employment or running a company
- Choose sole trader or limited company based on liability, admin and tax
- Register with HMRC or Companies House, and complete identity verification if you will be a director
- Open a separate business account and set up a simple record-keeping system
- Diarise key dates: 5 October registration, tax return deadlines and the VAT threshold
Official sources we checked
- GOV.UK – Set up as a sole trader
- GOV.UK – Register for Self Assessment if you're self-employed
- GOV.UK – Companies House fees
- GOV.UK – Companies House confirms identity verification rollout from 18 November 2025
- GOV.UK – Check if you're eligible for Making Tax Digital for Income Tax
- GOV.UK – Skilled Worker visa: taking on additional work
Checked on 1 October 2026. Rules and fees change — always confirm on the official page.
