UK Business Registration Costs for Sole Traders & Limited Companies

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Starting your own business is exciting, a little scary, and sometimes there are significant costs when setting up a business. You might have to purchase stock, new computer equipment and software, or employ people from day one—but what about registering your new company?

Although sole traders can start working straight away, if you want to be a limited company you’ll need to be registered with Companies House from the day you start operating, but how much is this going to cost?

How to register a business in the UK

Registering a business in the UK starts with choosing the right legal structure, and the two most common options are operating as a sole trader or forming a limited company.

As a sole trader, setup is simple and quick because you don’t need to register with Companies House. However, you do need to tell HMRC that you’re self-employed and register for Self Assessment.

By contrast, registering a limited company involves a bit more work. Before you begin, you’ll need to choose a unique company name, decide who the directors and shareholders are, and determine your share structure. You’ll also need a registered office address and a memorandum and articles of association, which set out how the company will operate.

You can do this yourself by applying directly through Companies House, and online registration is the fastest way to do so (typically within 24 hours). Postal applications are also accepted, but these take longer to process and cost more, but more on that second point shortly…

If you don’t want to register your company yourself, you can register through a formation agent or accountant, which will increase the cost, but will at least put your mind at ease that your new company has been registered correctly.

N.B. company formation is a service that Hoxton Mix plan to release in the future - you can sign up on the link above for updates on when this is released

Mandatory costs when registering as a sole trader

If you want to operate as a sole trader, you don’t have to register with Companies House, and there are no costs to registering with HMRC for self-assessment.

However, there are penalties for late registration and late payment of your tax return.

The deadline for registering for self assessment is 5th October following the completion of your first tax year (any income earned prior to 6th April). If you register late, you might be hit by a ‘failure to notify’ penalty, which is calculated as a percentage of the tax owed.

The penalty for paying your tax return late is £100, with additional daily penalties of £10 per day after three months, up to a maximum of £900. After six months, a further penalty of 5% of the tax due or £300 (whichever is greater) is applied. If your tax return is 12 months late, another 5% or £300 charge is applied.

There’s also a penalty if you register to pay VAT late, which is required for sole traders if taxable income exceeds £85,000 in any rolling 12-month period, not just a complete tax year. The charge levied depends on the reason for the late registration, and HMRC will not penalise you if:

• you have a reasonable excuse for failing to register, for example a bereavement;
• the failure to register was not deliberate;
• you have notified HMRC ‘without unreasonable delay’ after the reason for the delay as ended.

If HMRC do not deem your excuse reasonable, the percentage charge will depend on your specific circumstances: 

• Non-deliberate late registration the penalty is between 0-30%
• Deliberate late registration is between 20-70%
• Deliberate and concealed late registration is between 30-100%

Of course, you also have to remember to pay your tax return by 31st January, following the completion of your first tax year. For example, if you started operating as a sole trader in August 2025, you must register for self-assessment by 5th October 2026, and submit and pay your first tax return by 31st January 2027 on all income above the personal tax threshold.

Mandatory costs when registering a limited company

When registering a new limited company, there are several fees that must be paid.

1) Companies House incorporation fee

The incorporation fee is a one-off cost incurred when registering a limited company or limited liability partnership, and the amount you need to pay depends on how you choose to register.

For both business structures, online incorporation costs £100 (as of February 2026, up from £50), or £156 if you want same-day incorporation. If you wish to register your business by paper application you will pay £124 (as of December 2025, with no current plan to increase it in 2026).

2) Confirmation Statement fee (annual filing)

The Confirmation Statement is the second mandatory fee you’ll have to pay when registering your company, but you’ll also have to pay every year when doing annual filing. 

When doing this online it will cost you £50 (from February 2026, up from £34), or £110 for a paper Confirmation Statement.

Optional costs new businesses should be aware of

In addition to the mandatory costs that come with registering a business, there are numerous optional costs that you may incur, and in some cases, should seriously consider investing in because they will save you time and money in the longer term.

1) Registered office address, virtual office & director’s service address

When registering your new business you’ll need to provide a registered office address that will be made publicly available on the Companies House website. Although you can use your home address, this puts your privacy at risk and also jeopardises the credibility of your business in the eyes of its customers.

This means that while investing in a virtual office address isn’t required to register a new company, it’s highly recommended if you don’t have a physical office space just yet (or even if you do, many directors and sole traders still decide to use one).

Unlike a PO Box, a virtual London office address can be used as your official registered address with Companies House because it’s a genuine physical location in the UK. This allows startups and small businesses to register with Companies House with an address that protects their privacy and enhances their credibility, without the high cost of renting office space.

In addition to a registered office address, some small business owners choose to invest in a director’s service address. A director’s address is separate from your company’s official correspondence address, and it will also be publicly available information accessible on the Companies House website. If you use your home address, you’re putting your privacy at risk in the same way as if you use it as your registered office address.

A director’s service address (available from Hoxton Mix for just £30 per year) guarantees the privacy of you and your family.

2) Company formation agent or setup service

The cost of paying a company to form your business for you varies from supplier to supplier, while the services bundled in with the company formation will also have an impact.

For example, if you employ an accountant on a monthly retainer to manage your bookkeeping they might include company formation within that monthly cost, but dedicated company formation providers will often include optional extras that will increase that one-off cost. 

3) Business bank account

A business bank account will ensure your personal finances and your business’s income is kept separate, making bookkeeping and accounting much easier at the end of the year. Note that, although sole traders are not required to have a separate business bank account, limited companies are.

Although some providers might charge a small monthly fee for certain benefits and services, setting up a business bank account will typically be free of charge. Hoxton Mix customers can open a free business bank account with Tide, and receive £75 cashback.

4) Accountant or VAT registration support

The complexity of your accounts will determine how much money you should spend on professional accountancy support.

Sole traders with simple income and outgoings might be able to manage their annual tax returns themselves, especially if they’re not VAT registered, but limited companies and VAT-registered self-employed individuals should seriously consider seeking professional support.

If you do work with a professional bookkeeper or accountant, you can choose to do so once a year to help with your tax returns, or on a monthly recurring basis. Many sole traders and small companies pay in the region of £150 to £400 for a straightforward self-assessment tax return or accounts filing, which may include some bookkeeping support.

If you’re engaging a bookkeeper or accountant on an ongoing basis, some firms quote hourly rates of around £25 – £40+ per hour, with the final year-end service and return preparation potentially adding several hundred pounds more.

Ultimately, many small businesses often budget £300–£900 per year for combined bookkeeping and tax return work, although higher complexity (for example VAT, multiple income streams or company accounts) can push fees upwards.

5) Domain name, email, and website setup

The cost of hosting a company website and email account is relatively low, usually around £10-20 per year. However, if you want to get a website professionally designed and developed, this will cost significantly more.

The final price will depend on the level of complexity required, with the average price ranging from £2,000 to £20,000.

6) Business insurance

Although business insurance isn’t required to register your business, it may be a requirement of some clients or lenders, while it’s also highly recommended to invest in some level of insurance protection to ensure you’re not left facing huge legal costs if something goes wrong.

There are a few different types of insurance to think about here:

• Public liability insurance—crucial if you’re interacting with members of the public during your day-to-day work. The average cost varies depending on the work you do, but typically falls between £60 and £300 per year.
• Professional indemnity insurance—this covers businesses offering professional services from claims of negligence or errors that cause a client financial loss. The cost of this cover depends on your profession, levels of risk associated with the work you do and your turnover, but it ranges from £10 to hundreds of pounds.
• Employers’ liability insurance—this is a legal requirement if you employ one or more people, covering the cost of compensation claims from employees. On average, this insurance will set UK businesses back £60-300 per employee per year.

Total year-one cost breakdown (a sample estimate)

Below is an estimate of the year one costs you might have to pay to get started with your business. The first table shows your required costs, while the second shows your optional costs.

Minimum required cost for limited companies

Optional additional costs for both sole traders & limited companies

How to reduce business registration costs

Starting a business doesn’t need to be expensive, and there are several practical ways to keep registration costs under control without cutting corners. 

One of the most effective things you can do is to use a virtual office address provider instead of renting physical office space. A virtual address allows you to register your business with Companies House, protect your home address from being made public, and enhance your credibility with customers—all at a fraction of the cost of leasing an office. For many new businesses, this removes one of the biggest early expenses while still meeting legal requirements.

Beyond this, you should always apply online through Companies House rather than using a paper application if possible. Online registration is quicker and significantly cheaper, helping you get up and running faster while keeping fees to a minimum. Paper applications not only cost more but also take longer to process, which can delay your launch.

You can also reduce costs by using free or low-cost templates and software for essential legal documents like Articles of Association, shareholder agreements and basic contracts. Templates for these documents are widely available online and are often sufficient for straightforward business structures. Even in the case of complex business arrangements that require professional advice, starting with templates can still save money in the early stages.

FAQ

How much does it cost to register a company in the UK?

The minimum cost of registering a limited company in the UK is £150 if you choose to do so online, rising to £206 if you need same-day registration. This cost rises to £234 if you wish to register via paper application. These fees do not apply to sole traders.

Can I register a company for free?

There is no charge to register with HMRC for self-assessment as a sole trader, but there will always be a cost to register a limited company with Companies House—even if you choose a formations agent that advertises a lower cost than those outlined above.

Can I use a virtual office for Companies House?

Yes—a virtual office address complies with the requirements of Companies House because it is a genuine location in the UK. By contrast, a PO Box is not valid for registering a business.

What happens if I don’t file a Confirmation Statement?

Failure to file a Confirmation Statement risks significant penalties, including potential fines of up to £5,000, criminal prosecution and your company being struck off from the Companies House register.

What’s the cheapest way to register a limited company?

The cheapest way to register a limited company is to do so yourself via the Companies House website. This will cost £150 for the Companies House incorporation fee and the Confirmation Statement fee.