How to Start a Business in the UK

For a prospective new entrepreneur about to launch a business in the UK, deciding on the idea, money, people, and even the name for a new company matters more than the process of filing formal registration paperwork. 

We will examine each of these steps here (and we look at formal paperwork in our companion guide, how to set up a business in the UK). 

What Do You Need to Launch a Business? 

As a founder, you need:

• a workable idea
• a bit of evidence suggesting people will pay for what you are offering
• a place to operate from
• enough money to last the early months.

This money can come from angel investors or bootstrapping – using founders’ own money, supplemented with the business’s first revenues.

As well as these, you will also need:

• a name
• an understanding of what types of skills your new business requires
• knowledge of any licences you might need.

Those skills, in turn, show what sorts of employees you will be looking to hire. Trying to register before these questions are settled can mean revisiting early decisions later, and more expensively.

Developing Your Business Idea and Plan 

A good business idea solves a problem someone out there already has: building a better mousetrap, as Ralph Waldo Emerson is said to have put it. Writing a short business plan then helps you be clearer with yourself, along with any co-founders and early investors, about the basics: who your customers are, what they are currently buying, and why your version will work better or cost less.

One page setting out your product, customer, price, and the first year’s costs is enough.

If you could need inspiration about your idea, our guide on generating business ideas sets out practical ways to find one. Our list of business ideas for London gives examples especially tailored to one of the UK’s most competitive and varied markets.

Carrying Out Market Research 

You should begin doing market research with short surveys, a small trial sale, or just asking ten people in your target market if they would pay your proposed price.

You should aim to get a rough sense of price, who your first ten customers might be, and which competitors already serve the same need and how.

Talk to potential customers, study your competitors’ pricing, and check whether demand is seasonal or year-round. This will reduce the risk of building a company that offers something nobody wants to buy. 

Then revisit this research occasionally, even if informally. This can give a business advance notice of when its market has shifted.

Many local libraries offer free access to business databases and reference collections. You can get a free Reader Pass from the British Library to access databases that are normally expensive elsewhere at its Business & IP Centre. You can search for your competitors’ filed accounts on the Companies House website. Use them to get information about margins, growth rates, staff costs, and profitability that are typical in your sector. (Small and micro companies can file abridged or “filleted” accounts at Companies House without a profit and loss account. This means small competitors’ filed accounts won’t show margins or profitability.) 

There is also the City of London Small Business Research and Enterprise Centre. It is likewise free, with business advisers available on site for help using its resources, which include company intelligence tools and COBRA start-up guides. 

Cost of Starting a Business

Costs can vary enormously from one sector to another, but even so most new businesses need:

• equipment or stock
• a website and basic branding
• insurance
• a financial cushion for the months before income becomes reliable.

Underestimating that cushion is a frequent reason new businesses fail in their first year. A common rule of thumb is for a start-up to have enough money to pay three to six months of its essential costs as it gets going. Lean start-ups might be able to make do with a few thousand pounds.

Our breakdown of the cost of starting a business in the UK works through a few of these categories with current figures. Employers’ liability insurance, which you need once you employ staff, might cost between £150 and £600 a year for small, low-risk businesses, as a rough estimate. It can be higher for sectors such as construction and care. Public liability insurance could cost between £5 and £15 a month. Paying a freelancer for a website and basic branding might mean paying between £500 and £3,000. All this might cost between £150 and £600 a year if you do it yourself.

Funding and Support Available for New Start-Ups

Many businesses can start out with their founders’ personal savings, but formal funding exists for those that need deeper pockets. There is also the government-backed Start Up Loans scheme. Almost any new business founder can apply if they:

• live in the UK
• are 18 or over
• are either planning to start a business or have been in business for fewer than five years.

The scheme also pairs the loan with free mentoring for the first year.

Start Up Loans are unsecured personal loans to the founder, not the business, so the founder repays them. Founders can apply for loans that range from £500 to £25,000, at 7.5% fixed interest and over a term of one to five years. 

The GOV.UK website’s business finance support finder lists grants, loans, and regional schemes by sector and location. It is a good idea to check this website even if you expect your business to be entirely self-funded, since eligibility criteria change. Some schemes are easy to miss.

Where the right option is not obvious, there are four free business support helplines, one for each part of the UK:

• England: Business Support Service, 0800 998 1098
• Scotland: Find Business Support Scotland, 0300 303 0660
• Wales: Business Wales Helpline, 0300 060 3000
• Northern Ireland: Invest Northern Ireland helpline, 0800 181 4422

These give free guidance over the phone, and are a reasonable first call before committing to any particular funding route or spending time on an application that turns out not to fit.

Running a Business From Home

Many UK businesses start from home. A home base keeps costs down while the business proves itself, and it suits service and online businesses especially well.

You may need permission to do this from your mortgage provider or landlord, the local planning authority, and the local council, the GOV.UK website notes.

There can also be insurance and rates implications if you do decide to work from home. Home insurance policies may not cover business use. Business rates may also be due on the part of the home used for the business. On the other hand, HMRC allows sole traders and partners to claim part of their household costs as business expenses in their Self Assessment return.

Where a separate address is needed, for privacy, credibility with clients, or to keep home and work separate, a virtual office address provides one without the cost of leasing new premises outright.

Physical premises, such as a shop or office, usually warrant the overhead once you require them. For example, your staff need a place to work, or you have to put stock somewhere. 

Choosing a Name, Trade Mark, and Internet Domain Name 

A business’s name should be memorable – and also not already registered to someone else, whether as a company name or a trade mark. Our company name check tool confirms quickly that a name is not already registered at Companies House, before any branding is built around a name that another business owns.

It is important to understand the distinction between a company name and a trading name before settling on either. Businesses can use a trading name different from their registered company name.

Trade marks are separate, and need their own search on the GOV.UK Trade Mark Search tool. They can be registered for ten years, for an online cost of £205, and renewed indefinitely on the UK Intellectual Property Office register. 

Once you have registered a word, phrase, symbol, design, or combination of these things as a trade mark for your brand, you are allowed to use the ® symbol after it.

A matching domain name and a professional business email address also help make the business look established from its first day. Securing both at the same time can be a good idea. A popular name can disappear from domain registries within days.

Hiring a First Employee

Few founders have every skill their business needs from the outset. Identifying the gaps early – whether in bookkeeping, sales, a technical trade, or digital marketing – makes it easier for a founder to decide what to learn personally. The rest can be delegated to their first employees or outsourced to a freelancer or agency.

A founder who tries to do everything themselves might find their business’s growth tops out when they exhaust their own time. Bringing in even part-time help can help a business grow to meet the available demand instead.

Right-to-Work Checks

Any plan to take on staff should include right-to-work checks from the outset. These checks are a legal requirement. Since 1 October 2026, because of the Border Security, Asylum and Immigration Act 2025, you also need to check the right to work of people on worker’s contracts and individual sub-contractors. Here, a sub-contractor is someone you take on to do work you have contracted to provide to a third party. 

Doing a right-to-work check gives the business a “statutory excuse” against a civil penalty. However, not every supplier needs a check. For workers found through online matching services (like platforms for booking cleaners and tradespeople), checking their right to work is the responsibility of the matching service. And a self-employed business offering services to many customers falls outside the scheme too. The Home Office’s example for this is a plumber. 

Registering as an Employer and Setting Up a Pension

Other steps a founder needs to take before paying a first employee include registering as an employer with HMRC. You also need to set up a workplace pension scheme. Within six weeks after your duties start date, you need to write to a new employee about their pension rights. Then, beginning the month after your duties start, deducted contributions need to reach your staff’s pension scheme by the 22nd day of each month. (An employer can postpone automatic enrolment for up to three months, if they need more time to work out which staff to put into a scheme. You just need to inform each employee in writing within six weeks of the date you postpone from.)

Licences and Insurance You Could Need

Many business activities, ranging from selling food to showing films, require a licence from the local authority, a regulator, or another body. 

GOV.UK’s licence finder tool checks what a specific business needs by activity and location. Consulting it is a good idea even if your business might not appear to need any licences. The tool may not list every licence you need, so use it as a starting point, then run more thorough checks. 

Playing recorded music in a shop requires a music licence. Most shops that play recorded music get this permission from a company called PPL PRS Ltd, which runs TheMusicLicence on behalf of music copyright holders. Food businesses need to register with their local authority at least 28 days before they start trading. This registration is free and cannot be refused. Organisations that use personal information have to pay the Information Commissioner’s Office a data protection fee. (There are exceptions: these include if the organisations only handle records on paper, or only keep personal data to process their own employees’ payrolls and administration.)

Businesses also need to think about different types of insurance. Public liability cover protects against claims from members of the public. Professional indemnity cover matters for anyone giving advice or services. Employers’ liability cover becomes compulsory once a business starts to take on staff, under the Employers’ Liability (Compulsory Insurance) Act 1969.

Choosing a Legal Structure Before Registering

Sole traders, partnerships, and limited companies are the main legal structures available in the UK. Each changes how profits are taxed, how much paperwork is involved, and how personal liability works if the business runs into difficulty.

Choosing a legal structure doesn’t need to take place before the idea, the costs, and the name are chosen. Making it the first decision could encourage founders to register a structure that doesn’t fit once the business takes shape. Sole traders and partners pay Income Tax on their profits through Self Assessment. They have relatively little paperwork but unlimited personal liability for business debts. A limited company pays Corporation Tax, files accounts at Companies House, and generally limits its owners’ liability to the money they have put into the company.

Important Moments in the Life of a New Business

Common Questions About Starting a New Business in the UK

What Starting a Business Takes

Starting a business in the UK mostly involves coming up with a researched idea, a realistic budget, a workable name, and a clear sense of what the business needs to run day to day. 

After that, the following stages include choosing a legal structure and formally registering with Companies House or with HMRC (for a sole trader). Founders should start keeping business records, and register for VAT once taxable turnover passes the threshold. The same applies if they expect taxable turnover to go over £90,000 in the next 30 days alone. They can also explore funding and support available for new start-ups, for which Business.gov.uk is one source.