How do I start my own business?
Most businesses do not fail on the idea; they struggle on the administration around it. Here are the practical steps that put a new UK business on solid ground, in the order most people should take them.
1. Choose a structure
The two common starting points are operating as a sole trader or forming a limited company. A sole trader set-up is simpler and cheaper to run; a limited company separates your personal finances from the business and can be more tax-efficient as profits grow, at the cost of more administration. Many businesses start one way and change later; the right answer depends on your numbers, your risk and your plans. We cover the trade-offs in sole trader or limited company.
2. Register with the right authority
Sole traders register with HMRC for Self Assessment. Limited companies are formed at Companies House, and must then register for Corporation Tax within three months of starting to trade. If you expect to employ people, you will also need to register as an employer before the first payday.
3. Open a business bank account
A limited company must keep its money separate from yours; the company is a distinct legal person. Sole traders are not obliged to, but a dedicated account makes your records dramatically easier and your tax return faster and cheaper to prepare.
4. Set up your records from day one
The cheapest bookkeeping is the kind that starts clean. A simple cloud accounting setup with a bank feed, done in week one, costs a fraction of reconstructing a year of receipts in month twelve. It also means you always know whether the business is actually making money, which is the question that matters most in the first year.
5. Know your thresholds
Watch taxable turnover against the VAT registration threshold of £90,000, measured on a rolling twelve-month basis rather than your accounting year. Registering late is expensive. There is more detail in our note on the VAT threshold.
6. Put money aside for tax
Tax is the bill that surprises new owners because nobody sends an invoice until long after the money has been earned. A simple habit of transferring a percentage of income into a separate account, from the very first sale, removes the January panic entirely.
This note is general guidance, not advice on your circumstances. If you are starting out and want the foundations done properly, talk to us; helping new businesses set up well is a core part of what we do.