Starting a UK Limited Company 2026/27 — Formation, Tax & First 90 Days

Sole trader vs limited company — the honest comparison

When Ltd genuinely wins

• Profit above £30-40k/year — tax efficiency starts to matter
• Working with corporate clients who require Ltd status (some enterprise procurement)
• Multiple revenue streams that benefit from a corporate wrapper
• Meaningful personal liability risk (advice services, product sales)
• Planning to take on employees or business partners

When to stay sole trader

• Profit under £30k — Ltd overhead often eats the tax saving
• Simple service business with low liability
• You value simplicity over optimisation
• Testing viability before committing to formal structure

Your Company Formations — what you get

YCF is one of the established UK Companies House formation services. Packages range from basic (Companies House filing only) to full startup packages including registered office address, business bank account referral, VAT registration and first-year accounting.

Visit Your Company Formations →

What Ltd formation actually involves

1. Company name check (Companies House WebCheck)
2. Registered office address (yours or a service address)
3. Director details (name, address, DOB, nationality)
4. Person(s) with Significant Control (PSC) declaration
5. Standard articles or bespoke
6. Companies House filing (£12.99 minimum standalone)
7. HMRC corporation tax registration
8. Optional: VAT, PAYE, pension scheme registrations

Post-formation — the first 90 days

• Open a business bank account (Starling, Tide, Monzo Business, Revolut Business all popular)
• Set up bookkeeping software (Xero, QuickBooks, FreeAgent are the UK mainstream)
• Register for VAT if applicable
• Set up PAYE if paying yourself a salary
• Consider a workplace pension (SIPP-friendly for director-only companies)

Common first-year mistakes

• Mixing personal and business expenses
• Not saving for corporation tax (25% of profit due 9 months + 1 day after year end)
• Missing Confirmation Statement deadline (fine + potential strike-off)
• Taking too much dividend early (before year-end profit confirmed)
• Skipping director's pension contributions (miss corporate tax saving)

Frequently asked questions

How much profit before Ltd beats sole trader?

Rough rule: £30-40k/year profit. Below that, sole trader saves administrative cost. Above that, Ltd tax efficiency starts to compound.

Can I be a director of a Ltd company while employed elsewhere?

Yes, unless your employment contract prohibits it. Many employees run side-business Ltd companies. Check the contract first.

Do I need an accountant for a Ltd company?

Legally no, practically yes. Corp tax returns, dividend paperwork, and PAYE are complex enough that a £600-£1,500/year accountant usually saves more than they cost.

What's a PSC?

Person with Significant Control — anyone owning 25%+ of shares or with significant influence. UK law requires PSC disclosure to Companies House.