Setting up a limited company in 2026/27: 10 tips that save time and money

1. Check a limited company is right for you before you register

It depends on your profits and your plans. A sole trader business is simpler and cheaper to run. A limited company keeps the business's debts separate from you and gives you more choice over how and when you are paid. Since the April 2026 dividend tax rise, taking all the profit out as salary and dividends can leave you no better off than a sole trader. The tax advantage now comes mainly from profit you leave in the company, and much of that is tax put off rather than saved.

As a sole trader you are the business, and GOV.UK is clear that you are personally responsible for all of its debts. A limited company is legally separate from its owners, whose liability is limited to what they have invested (GOV.UK: choosing a legal structure).

The tax works differently too. A sole trader pays income tax on all the profit (Scotland has its own income tax bands), plus Class 4 National Insurance at 6% on profits between £12,570 and £50,270 and 2% above that (GOV.UK: self-employed National Insurance rates). A company pays Corporation Tax at 19% on profits up to £50,000 and 25% on profits over £250,000, with marginal relief in between (GOV.UK: Corporation Tax rates). You then choose how to draw the money out, as our guide to how to pay yourself as a director explains.

A company does bring more admin, from annual accounts to payroll. Try our sole trader vs limited company calculator, then talk to us before you register: changing structure later costs more than planning now.

2. How many shares should a new company issue?

Issue 100 or 1,000 ordinary shares rather than a single £1 share. Shares can be issued at a low value each, such as 1p, so this need cost no more than one £1 share, and it leaves room to bring someone in later.

With one share, giving a partner 10% means issuing new shares or splitting the existing one, with resolutions and Companies House filings to match. With 100 shares, you simply transfer 10. GOV.UK confirms that most companies start with one class of ordinary share, and that a share's value can be any amount (GOV.UK: shareholders).

Decide who will own the shares before you register. You confirm your shareholders and any people with significant control, for example anyone with more than 25% of the shares or voting rights, when you incorporate (GOV.UK: set up a limited company).

3. Should each shareholder have their own class of shares?

Often, yes. If each shareholder holds a different class, such as A, B and C ordinary shares, and the articles of association allow it, the directors can declare a different dividend on each class. With a single class, every share receives the same dividend.

That helps when shareholders have different tax positions, but it needs setting up properly. HMRC's settlements rules can tax dividends on the person who arranged them rather than the person who received them. A gift of shares to a spouse or civil partner should be outright and carry real rights: HMRC says income-only shares with no votes and no rights to capital do not qualify for the spouse exemption (HMRC manual TSEM4205). Repeated dividend waivers are another warning sign (TSEM4225).

Our guide to paying your spouse and children covers this in more detail.

4. Do directors have to verify their identity with Companies House?

Yes. Since 18 November 2025, every new director and person with significant control (PSC) must verify their identity once, either free through GOV.UK One Login or through an authorised agent such as an accountant, and then receives a Companies House personal code (GOV.UK: verify your identity). The rules are enforced: the first convictions for identity verification offences came on 16 September 2026 (Insolvency Service news).

We are one of those authorised agents: UniFi Advisory is registered with Companies House as an Authorised Corporate Service Provider (ACSP), so we can verify you and your fellow directors and PSCs. Our Companies House identity verification page explains who must verify, by when and with which documents.

5. Which letters should I look out for after registering?

Two letters matter most: HMRC's letter with your company's Unique Taxpayer Reference (UTR), a 10-digit number (GOV.UK: find a UTR), and the Companies House authentication code.

The authentication code is a 6-character code that works like a director's signature for online filings. Companies House posts it to the registered office, and it can take up to 10 working days to arrive. It is separate from the personal code you get when you verify your identity (GOV.UK: authentication codes).

Watch for both among the junk mail and scams that follow incorporation, and send them to your accountant so nobody is hunting for codes near a deadline.

6. When do I need to register for Corporation Tax?

Within 3 months of the company starting to do business, which is when its first Corporation Tax accounting period begins (GOV.UK: trading and non-trading). That is wider than starting to trade: GOV.UK says buying, selling, advertising, renting a property and employing someone all count, even before your first sale (GOV.UK: add Corporation Tax services).

Most companies set up Corporation Tax when they register at Companies House. If you did not, add it through your business tax account.

Watch the first year closely. A Corporation Tax accounting period cannot be longer than 12 months, so if your first accounts cover more than 12 months, you file 2 Company Tax Returns for them (GOV.UK: accounting periods). For returns due on or after 1 April 2026, a late return costs £200 straight away and another £200 at 3 months late (GOV.UK: late filing penalties).

7. Do I need a separate business bank account?

For a limited company, yes. The company is a separate legal person, so its money is not yours, and it should go through an account in the company's name.

Keep business and personal spending apart from the first day, and never pay personal bills from the company account. Money you take out that is not salary, a dividend or a repaid expense is a director's loan, and the company must keep a record of it (GOV.UK: directors' loans). If a loan is still outstanding 9 months after the year end, the company pays a 35.75% charge on loans made from 6 April 2026 (HMRC manual CTM61505).

It also means quicker bookkeeping and a more professional look to clients and lenders. Sole traders are not required to have one, but the same benefits apply.

8. Should I use accounting software from day one?

Yes. Cloud software such as Xero links to your bank feed, lets you photograph receipts on your phone and gives you up-to-date figures whenever your bank or an investor asks.

It is also becoming compulsory in more places. HMRC's free online service for filing company accounts and tax returns closed on 31 March 2026, so Company Tax Returns now go through commercial software (GOV.UK: service closure). Every VAT-registered business must keep digital records and file through Making Tax Digital software (VAT Notice 700/22). From April 2028, accounts filed at Companies House must come from software too (Companies House news).

Sole traders and landlords have Making Tax Digital for Income Tax to plan for: it has applied since 6 April 2026 where qualifying income was over £50,000, falling to £30,000 in April 2027 and £20,000 in April 2028 (GOV.UK: Making Tax Digital for Income Tax). See our Making Tax Digital guide, or let our bookkeeping service set your software up.

9. Can I claim costs from before the business started?

Yes. Revenue costs incurred up to 7 years before trading starts can be deducted as if they were spent on the first day of trading, as long as they would have been allowable once the trade began (CTA 2009 section 61; section 57 ITTOIA 2005 for sole traders).

That can include market research, software subscriptions and advertising before launch, as long as the cost is wholly and exclusively for the business. Stock bought in advance is not a pre-trading expense: its cost is deducted from your profits once trading begins (HMRC manual BIM46351).

Equipment goes through capital allowances instead. A new laptop bought for the business usually qualifies for the Annual Investment Allowance, which covers up to £1 million a year but not cars (GOV.UK: Annual Investment Allowance). Things you already owned cannot use that allowance, but they can often still get writing down allowances. Keep every receipt.

10. When does a new company have to register for VAT?

You must register if your taxable turnover for the last 12 months goes over £90,000, or if you expect it to go over £90,000 in the next 30 days alone (GOV.UK: when to register for VAT). The second, forward-looking test catches many new businesses that win a large contract early on.

GOV.UK's example: if you sign a £100,000 contract on 1 May, you must register by 30 May, with registration effective from 1 May. Taxable turnover includes zero-rated sales but not exempt or out-of-scope ones, and a business based outside the UK has no threshold at all.

You can also register voluntarily below £90,000 (GOV.UK: register for VAT). That can suit you if your customers are VAT-registered and reclaim the VAT you charge, because you can then reclaim VAT on your own costs. It rarely suits businesses selling mainly to the public. Our VAT assistance service can help you decide, and the VAT calculator shows the sums.

What are the deadlines in a new company's first year?

Most first-year penalties come from deadlines nobody wrote down. These are the ones every new limited company faces under the 2026/27 rules. Our accountancy service prepares and files your first accounts and confirmation statement.

Missed deadlines cost real money. Companies House charges a private company £150 for accounts up to a month late, rising to £1,500 if they are more than 6 months late, and the penalty doubles if accounts are late two years running (Companies House penalties). Our accountancy service diarises all of these for you, and our 2026/27 tax deadlines calendar lists them in month order.