Starting a Business in the UK: Your 2026 Step-by-Step Guide

The UK is home to around 5.5 million private-sector businesses, and every year hundreds of thousands more join them. If you are about to add yours to that number, congratulations and welcome to a year of real change.

Starting up in 2026 is not quite the same as it was even twelve months ago. Making Tax Digital is reshaping how records are kept, and Companies House fees rose in February. 

At Ellis & Co, we help new businesses across Chester, Wrexham and Warrington launch on solid foundations. Here is the practical, up-to-date roadmap.

Step 1: Pressure-test the idea

Before any paperwork, be honest about the numbers. 

Who is the customer, what will they pay, and what does it cost you to deliver? 

A simple one-page plan covering your pricing, costs and cash flow will tell you more than a 40-page document ever will. Plus, it’s the single best predictor of whether the business survives its first year.

Step 2: Choose your legal structure

This is the decision everything else hangs on. Most new ventures begin as a sole trader (simple, private, quick to set up) or a limited company (a separate legal entity with limited liability and a different tax profile). The right choice depends on your expected profit, your appetite for admin and whether you want personal protection.

We have covered this in depth in our guide to Limited Company vs Sole Trader — worth reading before you commit.

Step 3: Register with the right people

As a sole trader, you register for Self Assessment with HMRC. You must register once you have earned more than £1,000 from self-employment, and the deadline is 5 October in your business’s second tax year. HMRC sends your Unique Taxpayer Reference (UTR) within about 10 working days, and registration is free.

As a limited company, you register (incorporate) at Companies House. Note the 2026 change: the standard online incorporation fee rose to £100 on 1 February 2026, and the annual confirmation statement now costs £50.

Step 4: Open a business bank account

A sole trader is not legally required to have a separate account, but it makes bookkeeping (and your MTD quarterly updates!) vastly easier. A limited company must keep its finances separate, because the company’s money is legally distinct from yours. Many providers now bundle free accounting software with the account, which brings us to the next step.

Step 5: Get MTD-ready from day one

From April 2026, Making Tax Digital for Income Tax is mandatory for sole traders and landlords with qualifying income over £50,000, tightening to £30,000 in 2027 and £20,000 in 2028. In practice that means digital records and quarterly submissions to HMRC, so choosing compliant software now saves a painful scramble later. Our Best Accounting Software Guide 2026 walks through the options.

Step 6: Cover the essentials

Depending on your trade you may need insurance (public liability, professional indemnity, employers’ liability if you hire), the right licences, and a plan for VAT which is mandatory once your rolling 12-month turnover passes £90,000. If you take on staff, you will also need to run payroll and enrol eligible employees into a pension.

“The businesses that thrive are rarely the ones with the flashiest launch. They are the ones that get the boring foundations right. Register correctly, separate your money, and pick your software before you are busy. Do that, and the growth looks after itself.”

— John Farrell, Director, Ellis & Co

How Ellis & Co can help you start strong

Getting the structure, registrations and record-keeping right at the outset is far cheaper than fixing them later. We help new owners choose the right structure, register with HMRC and Companies House, set up MTD-compliant software, and plan for tax from day one.

Whether you’re trading from Chester, Wrexham or Warrington, talk to our team — or explore our dedicated business start-ups service.

About Ellis & Co

Ellis & Co is a leading firm of chartered accountants and business advisers specialising in accountancy & audit, bookkeeping, payroll, tax planning and business advisory services. We work with everyone from start-ups to established companies. With experienced teams in Chester, Warrington and Wrexham, we offer personalised solutions that help businesses succeed.

FAQs

Do I need to register my business before I start trading?

You can begin trading straight away as a sole trader, but you must register for Self Assessment with HMRC once you earn over £1,000, and no later than 5 October in your second tax year. A limited company must be incorporated at Companies House before it trades.

How much does it cost to register a company in the UK in 2026?

The standard online incorporation fee at Companies House is £100 (increased from £50 on 1 February 2026). Same-day and paper services cost more. Registering as a sole trader with HMRC is free.

When do I need to register for VAT?

You must register once your VAT-taxable turnover exceeds £90,000 over a rolling 12-month period, or if you expect to cross it within the next 30 days. You can also register voluntarily below the threshold.

Do new businesses have to use Making Tax Digital?

If you are a sole trader or landlord with qualifying income over £50,000, yes. Starting from April 2026, you must keep digital records and file quarterly. Choosing compatible software from the start is the easiest way to stay compliant.

Sole trader or limited company, which should I start as?

It depends on your expected profit, need for liability protection, and how much admin you want. Many owners start as sole traders and incorporate as they grow. See our full comparison.