The cost of setting up a limited company

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Introduction -what is the cost of setting up a limited company? 

As a UK contractor, you may be looking at starting a limited company for future contracting. Therefore, when you do this, how much does it cost to set up a limited company (UK)? There are several choices for your set up limited company cost and you can choose the contractor setup cost which you most prefer. However, when you start the process what is the cost of setting up a company for contracting? Basically, as you start the setting up a contracting business process, you it will also help if you have some guidelines on how to set up a limited company and the initial cost of contractor setup. Our guide on setting up as a limited company in the UK covers this in a lot more detail. Indeed, it shows how to undertake contractor limited company formation for your new business. When you are about to begin a limited company contract and are taking the steps to set up your own contractor formation, you may be moving into this from:

  • Being in an employment-type role.
  • Working for an umbrella company.
  • Working as a sole trader, you have decided to incorporate your business.

One important aspect to consider as part of the limited company set up process is the contractor cost of setting up a limited company (UK). Therefore, when we look at how much does it cost to register a company in the UK, we need to look at the choices available for your contractor company formation. When we investigate setting up a new company for UK contracting, there are in fact several ways that you can incorporate a new company. What is more, these different ways for a limited company setup also have different levels of limited company set up costs associated with them.

Initial thoughts

Setting up a limited company cost -the available choices

Are you ready to go ahead and register a UK private limited company? If you are, we will look at the different processes you can undertake when starting a limited company and the associated company set-up costs.

  • The first choice would be to form a company yourself. You would apply directly with Companies House.
  • Your second choice is to appoint an accountant. You may prefer to select a limited company contractor specialist to look after you. Once you have an accountant, you can ask them to do this for you.
  • As a third choice, you could opt to use a company formation agent.

Some initial questions which may arise as you start your new contracting career and are setting up a limited company as a contractor could include:

  • How much does it cost to start a contracting business?
  • What should we consider in terms of how to set up a limited company as a contractor?
  • How much does it cost to be a contractor and what is the initial cost of contracting setup?

When we look at how much is it to set up a limited company, there is a £12 standard fee to pay when you set up a limited company online with Companies House. On the other hand, you could choose to register by post on a paper form. The cost of setting up a ltd company through the post is £40. Notably, with the speed it takes when you create a limited company online, most will register via the internet.

Other initial considerations

Besides the cost of setting up a limited company, when you do set up your own business, you should also consider pre-trading expenditure. Our guide on business expenses also gives an overview of what you may be able to claim through your new business.

While we are considering how much does it cost to set up a limited company (UK), please also read our article covering tax tips for limited company contractors.

In addition, we explain here the process of closing a UK company. 

New company formation -incorporating your new company 

Setting up a company in UK -form it yourself

It is key to bear in mind that the process when you are setting up your own company as a contractor yourself is not too tricky. Besides, you can do this online and follow the onscreen instructions. When we look at how much does it cost to set up a limited company (UK) via this route there is just the £12 fee and your time (around 15-30 minutes).

When you pay the fee online, there are various options for this. Indeed, you will have the choice of paying this by debit card, credit card or even Paypal.

Setting up limited company -form it through your accountant     

When we look at how much to set up a limited company for contracting, your accountant will usually be happy to do this. When you are about to go ahead with the set up limited company for contracting process, most contractor accountants are well versed in forming contracting companies for their new contractor clients. Therefore, via this method, what is the cost of setting up a limited company for contracting (UK)?

If you ask your accountant to do this, they may be a setting up a limited company cost or fee that they charge you. On the other hand, they may absorb the cost of this when you are setting up your own company for contracting. This is usually the case if you sign up as a client and agree to pay them a monthly fee for their services.

Once your company has been formed, you can set up a company bank account. Another consideration will be if you need to register for VAT. 

Ltd company setup -form it through a formation agent

Once again, when we look at how much to set up a limited company, if you ask a company formation agent to do this for you, there will be a charge. Therefore, how much does it cost to set up a company under this route? Notably, the setting up a limited company cost or fee can vary between agents, as can the service they provide. Some will provide extras like setting up a business bank account and printing company papers. They may even do the VAT registration and give you a mail forwarding service.

Notably, most UK contractors prefer to let their accountants do this for them. Some contractors, though, will choose to do this themselves. 

The cost of setting up a limited company (UK) and what to consider

The actual process when you open limited company

You will need to fill in several sections as part of the process. These are part of the form IN01 that is available online once your company is incorporated. The details to fill in when setting up a limited company online or through the post are as follows:

  • The registered office address. This is the official address of the company. In addition, the registered address is where the company will receive any official mail.
  • Details for the company directors. These include the director’s name, service address, residential address, date of birth, nationality and occupation.
  • The company’s proposed share capital.
  • Type of business, i.e., the company’s trading activity(s) (the SIC code signifies this).
  • The shareholder details. These include their name and addresses.
  • PSC details (People with Significant Control). These include their name, service address, residential address, date of birth and how they control the company.

Usually, when a UK company is registered using the Companies House online service, it is set up with the `model’ Articles of Association. Basically, this is, in effect, the company’s rule book, which will govern its affairs. You can create your Articles of Association should you so wish. However, this will involve the help of a solicitor.

Companies House will also inform HMRC and your new company during registration. As part of this, your new company will automatically be registered for Corporation Tax.

The cost of setting up a limited company and how long it takes to set this up

Once you have incurred the cost of setting up a company and the setup process is complete, the turnaround time is that the new company is usually registered within 24 hours. This can take a bit longer sometimes, depending on how busy Companies House are at the time.

Other official documents

The official documents you will receive

As a result of setting up a private limited company, Companies House will email you:

  • Your Certificate of Incorporation. This is effectively the birth certificate for your new company, and you should keep this in a safe place. You will also be able to obtain a copy of this online from the Companies House public register, should you need to.
  • Memorandum of Association `Company having a share capital’. This page will need to be attached to the model Articles of Association. You can also obtain a copy from the Companies House register.

Articles of Association

The Articles of Association is a legal document of written rules. These outline the rights and powers of the company shareholders and directors. As part of the company registration process, you can opt to use standard articles. These are known as model articles, the default set of articles established by the Companies Act 2006. Alternatively, you can write and then upload your articles to Companies House. To enable you to do this, you may need the help of a legal adviser.

You can download the model Articles of Association from the link below: 

Other considerations 

Further initial tasks once you have set up a limited company

After you have set up your company, the next tasks are likely to be:

  • Search for a contractor accountant to look after your new company in future. There is lots of choice in the UK and most contractors choose a UK contractor accountant specialist.
  • Get contractor business insurance in place -your contract should state which cover you need. What’s more, when you use Code CAUK10 you can receive a great 10% contractor discount via this website on policies from one of the best contract insurance providers in the UK.
  • Set up a contractor bank account for your new limited company. Starling Bank are popular with contractors however there are three UK banks that will pay the FreeAgent licence fee if you open an account with them.
  • Get yourself clued up as a new UK contractor. There are lots of guides in the contractor blog on this website that cover all sorts of areas such as salary, dividends, expenses, tax guides etc.

What are the other typical costs when you run a limited company?

Besides the initial cost of setting up a limited company, there will be an annual fee from Companies House in the future. This fee is in respect of the Confirmation Statement, a form that needs to be submitted annually. The fee is £13 if you file online or £40 via the post (most company owners file online). The Confirmation Statement form shows all of the official details for a company. These include the registered office, directors, PSCs, trading activity(s), etc.

Other than the contracting cost of setting up a company and annual £13 fee, any additional costs will depend on your type of business. This is likely to include accountants’ fees, insurance, wages, rent or use of the home as an office. It will also include any other outgoings you will incur as part of generating income for and running your new company.

Final thoughts

We outline above what you need to bear in mind when considering the cost of setting up a limited company. When you look into this as part of your new UK contracting career, there are several choices for the cost of setting up a company. With regards to how much does it cost to set up a limited company (UK), this is not usually expensive and most contractors and UK business owners will let their accountant set up a limited company for them.

When you run a limited company, the only ongoing cost from Companies House is £13 per year. This fee will be due when the business files its annual Confirmation Statement.

Finally, a £10 fee is payable to Companies House when a company closes down. You send this when you submit the form through the post to apply for this. Alternatively, the fee is £8 is you apply to close your company online via the Companies House website.

Link to Contractor Advice UK group on LinkedIn

Published On: April 6th, 2023 / Categories: First timer guide, Starting Up Your Own Company /

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