Setting up a limited company in the UK is one of the cheapest things you will ever do in business. The actual registration costs almost nothing. But the real expenses come from everything around it: accountants, insurance, banking, and the bits nobody tells you about until you are already committed.
This guide covers every cost you should expect when forming a UK limited company in 2026, from day one through to your first year of trading.
Registering a limited company costs as little as £12 online through Companies House. But realistic first year costs including an accountant, insurance, and basic setup sit between £1,000 and £3,000 for most small businesses.
Companies House Registration
This is the only mandatory cost. You cannot trade as a limited company without registering with Companies House. The fees are straightforward and have not changed much in recent years.
| Registration Method | Cost | Turnaround |
|---|---|---|
| Online (GOV.UK) | £12 | Usually within 24 hours |
| Postal application | £30 | 8 to 10 working days |
| Same day service | £30 | Same day (submitted by 3pm) |
The online route is the obvious choice for most people. You fill in a form on the GOV.UK website, pay £12, and your company is usually registered within a few hours. There is no reason to use the postal route unless you are filing unusual articles of association.
The same day service is useful if you need the company number immediately, for example to sign a contract or open a bank account that day. At £30 it is not expensive, but most people do not need it.
Formation Agents
You do not need a formation agent to register a company. The GOV.UK process is simple enough for anyone to complete. However, formation agents offer packages that bundle in extras like a registered office address, digital document storage, and mail forwarding.
| Service | Typical Cost | What You Get |
|---|---|---|
| Basic formation package | £10 to £50 | Company registration only |
| Standard package | £30 to £100 | Registration + registered office address |
| Premium package | £80 to £200 | Registration + office + mail forwarding + documents |
The main reason to use a formation agent is if you work from home and do not want your home address on the public register. A registered office address costs £30 to £80 per year through most agents and keeps your personal address private.
Accountant Costs
You are legally required to file annual accounts and a corporation tax return with HMRC. You can do this yourself, but most limited company directors hire an accountant. It is one of those costs that pays for itself because a decent accountant will save you more in tax than they charge in fees.
| Accountant Type | Annual Cost | What Is Included |
|---|---|---|
| Online accountant (FreeAgent, Crunch) | £300 to £600/year | Software, basic support, filings |
| Local high street accountant | £500 to £1,500/year | Personal service, annual accounts, tax returns |
| Specialist small business accountant | £800 to £2,000/year | Proactive tax planning, payroll, VAT |
For a straightforward one person limited company, expect to pay between £500 and £1,000 per year. If you are VAT registered, have employees, or deal with complex invoicing, that figure moves towards £1,500 or higher.
Your accountant fees are a tax deductible business expense. A good accountant will also help you structure your salary and dividends to minimise your personal tax bill, which can easily save you £2,000 to £5,000 per year.
Business Bank Account
You are not legally required to have a separate business bank account as a limited company director, but you should. Mixing personal and business finances is a headache for your accountant and a red flag for HMRC if you are ever investigated.
| Bank Type | Monthly Cost | Notes |
|---|---|---|
| Digital bank (Starling, Tide, Revolut) | £0 to £10/month | Free basic tier, fast setup, app based |
| High street bank (Lloyds, NatWest, HSBC) | £5 to £15/month | Free for 12 to 18 months, then charges apply |
| Premium business account | £15 to £30/month | Dedicated account manager, credit facilities |
Most new limited companies start with a free digital bank account from Starling or Tide. These are perfectly adequate for a small business. The high street banks offer free banking for the first year or so, but their fees kick in afterwards and their onboarding process is painfully slow compared to the digital options.
Insurance
The insurance you need depends on what your company does. Some types are legally required. Others are technically optional but practically essential.
| Insurance Type | Annual Cost | Required? |
|---|---|---|
| Employers liability (if you have staff) | £80 to £300/year | Legally required with employees |
| Public liability | £50 to £300/year | Not legally required but often contractually required |
| Professional indemnity | £100 to £500/year | Essential for consultants, advisors, creatives |
| Contents and equipment | £50 to £200/year | Optional but sensible |
If you are a sole director with no employees, no premises, and you work from home providing a professional service, you might get away with just professional indemnity insurance at around £100 to £200 per year. If you work with the public or visit client sites, add public liability on top of that.
Other First Year Costs
- Domain name: £8 to £15 per year for a .co.uk
- Email hosting: £0 to £5 per month (Google Workspace starts at £5.20/month)
- Basic website: £0 to £500 depending on whether you build it yourself or hire someone
- Business cards and stationery: £20 to £100
- Accounting software: £0 to £35 per month (often included with your accountant)
- HMRC registration: £0 (free, but you must register for Corporation Tax within 3 months of trading)
- ICO data protection registration: £35 to £60 per year (required if you process personal data)
Total First Year Cost
| Scenario | Estimated First Year Cost |
|---|---|
| Bare minimum (solo, home based, no staff) | £300 to £800 |
| Typical small business (accountant, insurance, basic setup) | £1,000 to £2,500 |
| Professional services (with PI insurance, website, branding) | £2,000 to £4,000 |
| Trade business (with premises, van insurance, tools) | £5,000 to £15,000 |
Starting a limited company in the UK costs £12 at Companies House. But a realistic budget for your first year of proper trading, including an accountant and basic insurance, is £1,000 to £2,500. That is genuinely cheap compared to almost any other country in the world.
Frequently Asked Questions
Is it free to set up a limited company?
No, but it is close. The cheapest route is £12 through the GOV.UK online service. Some formation agents advertise free company registration but charge for the extras you will need anyway.
Do I need an accountant for a limited company?
Legally, no. Practically, yes. Limited company accounts are more complex than self assessment tax returns. A good accountant will save you more in tax efficiency than they charge in fees. Budget £500 to £1,000 per year.
Can I use my home address as the registered office?
Yes, but be aware that your registered office address is public information. Anyone can look it up on the Companies House register. If you want privacy, use a registered office service for £30 to £80 per year.
How long does it take to set up a limited company?
The actual registration takes about 15 minutes online and your company is usually incorporated within 24 hours. Opening a bank account, setting up with HMRC, and getting insurance sorted will take a few more days to a couple of weeks.
What is the difference between a sole trader and a limited company?
A sole trader is simpler and cheaper to run, but you are personally liable for business debts. A limited company separates your personal and business finances, which protects your personal assets. Most people switch to a limited company once they are earning over £30,000 to £40,000 per year because the tax savings outweigh the extra admin costs.