Setting up a limited company in the UK is actually a relatively direct process, but then you should keep in mind that there are associated costs and legal requirements that business owners must consider.
Whether you are forming a private limited company (Ltd) or any other type of corporate entity, the main point is to comprehend the financial side of it.
In this guide, we will break down the costs involved and provide insights into the registration process involved in setting up a Limited Company in the UK.
Costs of Registering a Limited Company
One of the major costs when setting up a limited company with Companies House is the registration fee. Here are the following cost options according to the registration method:
- Online registration(Companies House website) – £12 (usually processed with 24 hours)
- Postal registration(paper application via form IN01) – £40 (takes around 8-10 days)
- Same-day registration – £100 (if received before 2 pm on a working day)
It should be said that the most common practice is for companies to go for online registration due to its affordability and speed.
Additional Costs to Consider
A. Business Bank Account
It is not mandatory, but a separate business bank account is highly recommended.
That being said, most banks during the first year grant free business banking; however, after its expiration, one has to pay fees, the price of which might range from £5 to £12 per month.
B. Accountant or Company Formation Agent Fees
If you are getting any professional help such as having accounting services or using company formation services to do the registration, then, the cost you should be ready to pay can be between £50 and £300 based on the type of service the client needs.
A few accountants, in addition to tax filing, bring along bookkeeping services, which are those that are required.
C. Legal and Compliance Cost
- Memorandum and Articles of Association – While it is the case that standard templates are free of charge at the Companies House, the customization of documents is between £50 and £150.
- Registered Office Address – There is the option of using a virtual office or a registered address service, which is around £30 to £150 per year in case you want to keep your address confidential.
- Director’s Service Address- This will be the same as the registration office address, and hence, there will be an additional cost of between £50 and £100 each year.
D. Domain Name and Website
In the case of the business that you are running, you might think of getting a domain name as well as a web server:
- Domain name – £5 to £50 per year (depending on the provider and extension)
- Website hosting and design – £50 to £500 per year – Preferably working with other websites
E. Business Insurance
Business insurance is a necessary expense for some sectors, such as public liability insurance (from £50 a year) and professional indemnity insurance (from £150 a year).
Ongoing Cost of Running a Limited Company
After your company is registered, you will be required to pay the following outgoing money, namely:
- Annual Confirmation Statement (Companies House) – £13 online, £40 by post
- Corporation Tax – They would give you 19% (or that would be up to 25% on the company’s returns with excess £250K)
- Accountant Fees (if applicable) – The owner or CFO would pay between £500 and £1500 annually for filing tax returns and complying with legal requirements.
- VAT Registration – You need to register for VAT if your turnover.
Tax Benefits Considerations
One of the extraordinary factors is the fact that they pay little taxes and so they are tax efficient. Corporate tax is paid by limited companies, but the rates might be lower than personal tax rates.
There are directors who can take a salary and also a dividend, which is a good way of saving money.
Steps to Set Up a Limited Company in the UK
- You have to get a company name first: Make it different and unique from the rest of the world, and follow the Companies House regulations accordingly.
- The required submission: You have to introduce your company to Companies House before it takes effect through either an online system or sending a hard copy version.
- Affirming Directors and Shareholders – This should be done by a minimum of one responsible director.
- We should make this control happen – This instrument shows the number of partners and the main rules, inclusive of the proceeds, management, and return of shares.
- We must announce: Within three months of the time you have engaged in the business.
- Such a company can be run – You need to find a commercial bank to carry out your financial transactions.
Conclusion
The total cost of setting up a limited company in the UK can range from as little as £12 (Do It Yourself online registration) to over £500, depending on additional services like accountants, legal support, and office addresses.
While there are ongoing costs, the benefits of limited liability and tax efficiency make it a worthwhile investment for many entrepreneurs. Before proceeding, access your business needs and budget to ensure a smooth incorporation process.
By understanding these costs, you can make informed decisions about how to set up a limited company in the UK while minimizing unnecessary expenses.
