While Self-Employed is the most common form of business, it is not the only option when you want to have an independent business in the UK. An alternative – and often a more favourable one – may be a Limited Company. What are the benefits, when is this solution for you, and most importantly – what does it look like to register a Limited Company?
What is a Limited Company (LTD)?
A Limited Company (LTD) is a capital company that can be established by one or more individuals. This means you have the right to run it entirely on your own or with other people (shareholders).
An LTD company has its own legal personality. Unlike in the case of Self-Employed, you act not in your own name but on behalf of the company. Your liability is limited to the invested capital (you are not personally liable with all your assets).
You register such a company in the official register called Companies House, and for tax purposes, also with HMRC. You are also required to keep accounts and pay corporation tax.
When can setting up a Limited Company be beneficial?
A Limited Company is definitely not a solution for everyone. However, there are many cases where registering an LTD company will prove more beneficial than registering as self-employed in the UK.
This form of business in the UK has several major advantages:
- you do not need to be a UK tax resident or even live in the UK for the registration of a Limited Company to be possible (the situation is completely different for Self-Employment),
- you benefit from a high tax-free allowance—£12,500,
- if you are an LTD director, you are entitled to an additional tax-free allowance,
- there is no need to pay social security contributions (ZUS),
- you can do business this way in the UK without leaving Poland or any other country
- you have access to a UK pension,
- the tax rules are relatively simple (you are subject to more requirements than in the case of self-employment, but it is still not very complicated).
It is worth adding that the situation has not changed much even after Brexit. Although many new procedures came with the UK leaving the EU, a company in England run as an LTD is still really profitable. Setting up a Limited Company also remains relatively simple and fast.
Step-by-step Limited Company registration in the UK
Setting up an LTD company essentially involves a few steps that you need to take if you decide to run a business in the UK in this form.
1.Choose a company name
Every LTD company operates under a specific name. Therefore, you need to choose one before registration. There are a few rules:
- you can use your first and last name as the company name, but it must end with “Limited” or “Ltd” (or the Welsh equivalent “Cyfyngedig” and “Cyf”),
- if you use your first and last name as the company name, you may have the same company name as another business,
- in other cases, as a rule, you are not allowed to use a name that is the same as another registered company—you can check the availability in the search engine on the gov.uk website.
If you register a company with a name too similar to one used by another business, Companies House will contact you and tell you what to do in this situation.
2. Choose a director and secretary
An LTD company must have at least one director (Company Director). This role must be held by someone at least 16 years old. They do not need to live in the UK, but the company must have a registered office address in the UK.
The director is employed by the company under an employment contract. Their responsibilities include ensuring that the company complies with regulations set by Companies House and HMRC. They will also be responsible for accounting and tax returns.
If you intend to run the company on your own, you can serve as both the director and shareholder.
Registering an LTD company does not involve the obligation to appoint a company secretary. However, a secretary can be very helpful, considering that they act as the chief administrative officer of the company.
3. Establish the shareholder structure
Since an LTD company is a corporate entity, it also means it includes shareholders. If you are running the company alone, you will be the sole shareholder (and simultaneously the director of the LTD).
However, you can also decide to involve more people in your business. In that case, be sure to indicate shareholders who have significant control (PSC), meaning they hold at least 25% of the shares.
4. Create the LTD company’s articles of association and prepare the memorandum of association
Two documents are required to form an LTD company:
- Memorandum of Association – a statement signed by all original shareholders, under which the company is established. You do not need to prepare it yourself—it will be automatically created as part of the online registration. You cannot change the memorandum after the company is registered.
- Articles of Association – the written rules for running the LTD company. You can draft it yourself or use a ready-made template.
5. Register the Limited Company
The final step is to register the LTD company. To do this, you must:
- establish the company’s registered office address—it must be in the UK and in the same country where you will register the business (for example, a company in England must have its registered office in England). This address will be publicly available in the register,
- choose a SIC code (Standard Industrial Classification) – this is a code for business activities corresponding to your business. For example, for a company producing pet food, the code would be 10920. You can find the code matching your business using a special list,
- register your company with Companies House.
6. Don’t forget to register with HMRC
After completing the last step, you must remember to register with HMRC for tax purposes—running an LTD company requires paying corporation tax. You have 3 months to register with HMRC after registering with Companies House.
To register, you need to log in using your Government Gateway user ID and password (or create one during login). You will also need your unique taxpayer reference (UTR), which you will receive from HMRC within 14 days of registering your company with Companies House.
When registering with HMRC, provide the following information:
- your company registration number,
- the date you started your business (this will mark the beginning of your company’s first accounting period),
- the date for filing annual accounts.
After correctly registering, HMRC will inform you of the deadline for paying corporation tax.
What you must remember after registering an LTD company
Registering a Limited Company involves several responsibilities that you must take care of while running your business.
This primarily includes company and accounting documentation, such as:
- financial and accounting records,
- records concerning the company (directors, shareholders, votes and resolutions of shareholders, transactions related to the purchase of shares in the company, etc.),
- the PSC register (Persons with Significant Control),
- documentation related to the money received and spent by the company, assets owned by it, debts, shares, goods bought and sold, other financial documents, information, and calculations needed for financial statements and tax returns.
Some people decide to handle these responsibilities themselves. However, you don’t have to manage everything on your own. Firstly, it requires a significant commitment of your time, which could otherwise be spent on running the business. Additionally, accounting and company administration can often be complicated for entrepreneurs without the appropriate education.
For this reason, many individuals running this type of business choose to seek help from an accountant. This not only saves a lot of time but also ensures that everything is under control—an accountant not only keeps track of deadlines and formalities but also finds the most optimal solutions from a financial and tax perspective.
If you opt for this solution, make sure to hire an accountant specializing in UK tax law.
