How to start a business in the UK: 8 steps from idea to first sale

Working out how to start a business can feel like a hundred jobs at once. In practice, it's eight steps in a sensible order: test the idea, pick a structure, register, understand your taxes, open a bank account, get insured, check licences and keep records. This guide walks through each one using GOV.UK and HMRC rules, so you know what's legally required and what's simply good practice.

By the Business Account Review editorial team · checked 25 October 2026 · How we check

Not legal or tax advice: this guide explains how to start a business using official guidance. Your own situation may differ, so check GOV.UK or speak to an accountant before you make big decisions.

How to start a business: the 8 steps at a glance

Here is how to start a business in the order most people tackle it. You don't need to finish one step before you begin the next, but registering and tax are easier once you've chosen a structure.

1
Test the idea
The first step in how to start a business.
2
Choose a structure
Sole trader, limited company or partnership.
3
Register
With HMRC or Companies House.
4
Understand your taxes
Know what you'll owe.
5
Open a business account
Keep business money separate.
6
Get insured
Some cover is compulsory.
7
Check licences and premises
Some trades need permission.
8
Keep records
From the first day you trade.

Step 1: Test the idea before you spend

The cheapest part of learning how to start a business is the testing. Before you buy stock, kit or a logo, find out whether real people will pay. A few low-cost ways to do it:

Pre-sell: take a few orders or bookings before you invest.
Price check: see what similar businesses charge and whether you can still profit.
Cost it up: list what each sale costs in materials, time and fees.

If borrowing is part of how to start a business for you, a written plan helps. Our guide on how to write a business plan covers what lenders expect to see.

Step 2: Choose a business structure

Choosing a structure is the first legal decision in how to start a business. GOV.UK says most businesses register as a sole trader or a limited company, and that the structure you choose "can affect the way you pay tax and your legal responsibilities". You can change structure later.

Sole trader

The simplest to set up and keep records for. You keep the profits after tax but you're personally responsible for all business debts.

Limited company

Legally separate from its owners and run by one or more directors. Owners are liable only up to their investment, but there are more duties.

Partnerships, social enterprises and other forms exist too. If you're torn, our sole trader or limited company guide compares the two in detail.

Step 3: Register with HMRC or Companies House

Who you register with is the part of how to start a business that depends most on your structure.

Sole traders can start trading without registering. GOV.UK says you must register for Self Assessment if you earn more than £1,000 in a tax year (6 April to 5 April), and you can register earlier. The deadline is 5 October after the end of the tax year you started. Our register as self-employed guide covers each stage.
Limited companies must register with Companies House before they trade. You'll need at least one director, at least one shareholder, a registered office address, a SIC code describing what the company does and articles of association. The Companies House fees page lists online incorporation at £100.

Either way, you'll need a name. Sole traders can trade under their own name or a business name, while companies must follow Companies House naming rules. Our guide on how to choose a business name explains the rules for both.

Step 4: Understand the taxes you'll pay

You don't need to be a tax expert. But knowing how to start a business properly means knowing which taxes might apply, so you can set money aside from day one.

How to start a business: the main taxes (GOV.UK, checked 25 October 2026)
Tax	Sole trader	Limited company
Income Tax	On your profits, through Self Assessment	Directors may pay it, depending on how they take money out
National Insurance	Class 4 is due on profits over £12,570 a year (2026 to 2027)	Depends on salary paid through payroll
Corporation Tax	Not payable	Payable on company profits
VAT	You must register if taxable turnover over the last 12 months goes over £90,000, or you expect it to within the next 30 days. You can also register voluntarily.

Making Tax Digital for Income Tax is now part of how to start a business, too. GOV.UK says that from 6 April 2026, sole traders and landlords with total self-employment and property income over £50,000 must use it, which means compatible software and quarterly updates. Check the current thresholds on GOV.UK if you're close to that figure.

Step 5: Open a business bank account

Banking is the step of how to start a business you'll notice every day. A limited company is its own legal person, so its money needs an account in the company's name. Sole traders aren't required by GOV.UK to have a separate account, but many open one because it makes records and tax returns far easier. Your personal bank's terms may also limit business use. Your provider's own eligibility rules will also apply.

Compare monthly fees, free transfers, cash deposits and whether your money is FSCS-protected or safeguarded. You can compare business bank accounts side by side on our site.

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Step 6: Get the right insurance

Insurance is the part of how to start a business that people often leave too late. Only some insurance is a legal must. GOV.UK says you must get employers' liability insurance as soon as you become an employer, with cover of at least £5 million from an authorised insurer. You can be fined £2,500 for every day you're not properly insured. There are exceptions, for example if you only employ a close family member.

Other cover is optional but common, such as public liability and professional indemnity. Sole traders have unlimited liability, which is why GOV.UK points them towards business insurance. Speak to an insurer or broker about what fits your risks.

Step 7: Check licences, premises and data

A step people often miss when they research how to start a business is permission to trade. Food businesses, taxis, street trading, alcohol and many other activities need a licence or registration. GOV.UK's licence finder tells you what applies where you are.

Working from home: check your mortgage, tenancy and home insurance terms.
Renting premises: you may become liable for business rates.
Customer data: check GOV.UK's data protection guidance.

Step 8: Keep records from day one

Good records are the least exciting part of how to start a business, and the part HMRC cares about most. GOV.UK says sole traders must keep records of business income and expenses from the day they start trading, and keep them for at least 5 years after the 31 January submission deadline for that tax year. Companies have their own record-keeping rules.

Simple habits help:

photograph receipts on the day you get them
use one account for business money so your statements tell the story
send numbered invoices and note when each is paid
put a share of each payment aside for tax

Part of how to start a business well is picking tools that cut admin. Many business accounts link to bookkeeping software or include receipt capture. Check what each provider includes before you choose.

How to start a business: your launch checklist

Tick these off as you go. They're the practical end of how to start a business, in one list.

I've tested demand and worked out my costs per sale
I've chosen a structure (and checked I can change later)
I've checked my name is free and not too close to a trade mark
I've registered with HMRC or Companies House, or noted my deadline
I know which taxes apply and I'm setting money aside
I've opened a business account
I have any compulsory insurance and have considered other cover
I've checked licences, premises and data rules
I have a system for receipts, invoices and records

Different starting points

How to start a business looks a little different depending on where you're coming from. These examples are illustrations, not recommendations.

A side business alongside a job

For many people, how to start a business means starting small as a sole trader. Watch the £1,000 trading income figure and the 5 October deadline.

A trade or service with risks

If you work in customers' homes or give advice, insurance and liability matter more. Some choose a company for limited liability.

A business you'll fund with a loan

Here, how to start a business comes down to evidence: expect to show a plan and cash flow forecast. The government-backed Start Up Loans scheme asks for both.

The short version

How to start a business in the UK is mostly about doing things in the right order. Test first, choose a structure, register on time, set money aside for tax, then open an account, insure and keep records. If you get stuck on how to start a business in your particular trade, GOV.UK's business support pages and an accountant are good next stops.

How to start a business: FAQs

How much does it cost to start a business in the UK?

Registering as a sole trader with HMRC is free. Registering a limited company online costs £100, according to the Companies House fees page. Everything else, such as stock, kit, insurance and a website, depends on your business.

Do I need to register before I start trading?

Sole traders can start trading first, but must register for Self Assessment if they earn more than £1,000 in a tax year. A limited company must be registered before it trades.

Can I follow these steps on how to start a business while employed?

Yes, many people do. Check your employment contract for any restrictions, and remember your business profits count towards your taxable income.

What's the first thing to do when learning how to start a business?

Test whether people will pay for what you're offering. It costs little and shapes every later decision.

Sources

GOV.UK: set up a business
GOV.UK: become a sole trader, and set up a limited company
GOV.UK: self-employed National Insurance rates (2026 to 2027), register for VAT, Making Tax Digital for Income Tax step by step
GOV.UK: employers' liability insurance
GOV.UK: business records if you're self-employed (how long to keep your records); Companies House fees
All sources checked 25 October 2026.