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When starting a new business in the UK, there are a lot of documents to prepare, as well as obligations and legal requirements for you to fulfil in respect of HMRC and Companies House.

A question we're often asked by entrepreneurs looking to launch their first business is 'do I need to register my company?'

Although this isn't required for sole traders, it's a legal requirement for limited companies, and there are various benefits of doing so—but when, and how, do you go about it?

So, if you’ve got a great business idea and you need to know how to register a company in the UK, why you need to do it and by when, read on. This guide will help to make sure your business is set up correctly, allowing you to focus on what you do best.

What is registering a business?

Every new limited company in the United Kingdom is subject to mandatory registration with HMRC and Companies House.

Registering a business in the UK is simply the process of officially establishing your ‘business entity’ with these government bodies, while also protecting your company name, as well as ensuring tax and regulatory compliance.

Why should you register your business?

If you want to set up your new business as a sole trader (the most simple business structure available to you) or as a partnership with someone else, you only need to register for self-assessment with HMRC. This must be done by 5th October following the completion of your first tax year as a business (5th April), and is required for you to submit a tax return.

However, if you set up your business as a limited company, you must also register with Companies House. This is a legal requirement, but there are also some benefits to doing so.

One of the most important reasons is that incorporating your business provides the founder(s) with something called limited liability. This means you are not personally liable for debts or additional liabilities associated with the business, which isn’t the case when you’re a sole trader.

There are also tax benefits to being a director of a limited company as you can split your earnings between a salary and company dividends. The basic rate of tax for dividends is just 8.75%, compared to 20% for income tax, meaning you can claim your annual personal allowance in salary, and the rest in dividend payments.

What types of businesses need to be registered?

For most small businesses, whether or not to register with Companies House is optional, but there are certain types of businesses that have to register. These include:

• Public limited company (PLC)
• Private company limited by shares (LTD)
• Company limited by guarantee
• Unlimited company (Unltd)
• Limited liability partnership (LLP)
• Community interest company
• Industrial and provident society (IPS)
• Royal charter (RC)

For a balanced view on private limited companies, read Hoxton Mix's article covering both the advantages and disadvantages.

At what point do you need to register your business with HMRC?

Every business must be registered when its income exceeds £1,000 per tax year. If your income is lower, you can choose the trading income allowance option. Thus, business owners in the United Kingdom can earn up to £1,000 without informing HMRC and declaring their turnover.

The important point is that this limit is about income, not profit. However, using the trading income allowance is not always optimal from a tax point of view, so as a business owner you must ensure that this option is right for you. Remember, you can register with HMRC regardless of your business income.

When do you need to register your business with Companies House?

Sole traders should register with HMRC for self-assessment reasons, and limited companies must register with Companies House because of additional legal requirements. 

Companies House is the agency that directly maintains the official register of businesses in the United Kingdom, keeping a record of all registered organisations and providing access to data about them.

But when do you need to register a business?

Unlike registering as a sole trader, limited companies must register with Companies House before you can start trading legally. You must register your business with HMRC within three months after you start trading.

What do you need to register your business in the UK?

When registering your new business with Companies House, there are various legal requirements for starting a small business that you need to meet.

First of all, your company name needs to be unique, but it should also not contain any of Companies House’s ‘forbidden’ terms. You can check the name you want to use to register a new UK business qualifies with the Companies House name check tool.

Your new company also needs to have a registered office address in the UK, located in the same UK region the business is based in (for example England, Scotland or Wales). This address will be listed on the public record, and it must be a genuine physical address—a PO Box address is no longer acceptable as a registered business address.

Although you can use your home residence to register a business in the UK, there are a few disadvantages of using your home address for a business to be aware of. Remember, anyone that searches the Companies House directory for your company name will be able to find your registered business address, so using your family home jeopardises your privacy and risks disgruntled customers or suppliers showing up on your doorstep. This is why company founders will often secure a virtual office address for UK business registration.

Only one shareholder and company director is necessary to establish a company (unless it’s a Partnership or Limited Liability Partnership), although that company director must be a ‘natural person’ or individual (not a corporation) and be over 16, while each director must also provide their service addresses to Companies House. Again, this address will be on the public record, but unlike your registered company address, it can be anywhere in the world.

Can you run a business without registering it?

You can run a business without registering it with Companies House, but only if you’re using the sole trader or partnership business structures. In this case, you must only register for self-assessment with HMRC, although you’re registering as an individual rather than setting up your business as a separate legal entity.

For limited companies (and other business structures), registering a business with Companies House is a prerequisite for complying with the requirements of legislation in the United Kingdom. The exception to this is if your business does not exceed £1,000 turnover in any given tax year.

What happens if you don’t register your business in the UK?

If you’re self-employed you don’t have to register yourself as a business with Companies House, only with HMRC for self-assessment. However, if you do wish to set up a limited company, you can’t trade legally as that business entity until you’ve registered with Companies House. Up to that point, you are considered a sole trader who must have registered for self-assessment by 5th October following the completion of your first tax year.

However, note that there are some types of businesses that need to be registered (see above), and failure to do so when necessary could result in a significant fine and other legal penalties.

Do you need to register your small business in the UK?

So, in general, any business in the UK must be registered if a trade or professional activity is carried out, goods or services are bought or sold, income and profit are generated, and interest is earned. All this indicates that you are not doing a hobby, but a business.

When answering the question, “do I need to register my small business in the UK” it is important to understand what you call a small business. It is one that has less than 50 employees and an annual turnover of fewer than 10 million euros.

Most often, small businesses are registered in the form of sole traders. In this case, the only thing you need is a national insurance number. The owners of such a business receive all profits after taxes but are fully responsible for all business processes. The sole trader registration in the UK provides for the establishment of business owners as self-employed and the payment of all taxes.

In addition, the choice of a sole trader structure for a small business is also more optimal because it is easier to transform a sole trader into a limited liability company than the other way around.

Consider Hoxton Mix your trusted company formation partner

At Hoxton Mix, we offer a full range of advanced company formation services in the United Kingdom. Our team helps businesses of any type and with any structure to carry out all the necessary registration processes in Companies House and declaration of income in HMRC according to UK law.

We will help you, as business owners, avoid paying fines, liability, and other serious consequences for the late registration of a business and non-payment of taxes, meaning you can avoid the hassle and focus on what you do best—serving your customers.
To find out how Hoxton Mix can help you to register a new UK business, as well as set you up for success with a virtual office and supporting services, get in touch with our experienced team today. You can call us on 020 3475 3374, email us at help@hoxtonmix.com, or by clicking the Live Chat icon to chat to the team right now.

FAQ

Do all businesses need to be registered?

No, sole traders and partnerships do not need to be registered with Companies House, but they do need to register with HMRC for self-assessment if their turnover exceeds £1,000 per tax year. However, if you want to take advantage of all the benefits that come with being the director of a limited company or similar business structure, you must register with Companies House before you can start trading legally.

Can you run a business without registering it in the UK?

Yes, if your business falls outside of the terms of required registration and you wish to operate as a sole trader or partnership, although all businesses operating within the UK and exceeding £1,000 turnover per year must register for self-assessment with HMRC.

When do you have to register a business?

You have to register a business with Companies House before you can start trading legally as a limited company. You must register with HMRC within three months of you starting trading, although we would recommend doing so as soon as possible to avoid falling foul of the law.

What happens if you don't register your business in the UK?

You can be subject to a significant fine and other legal consequences if you fail to register your business with Companies House before it is necessary to do so, including being held liable for non-payment of taxes. To avoid this, choose a trusted and reliable company formation partner like Hoxton Mix.