Quick answer: To start a business in London in 2026, choose a structure (sole trader or limited company), register it (with HMRC for Self Assessment, or with Companies House for £100 online, with identity verification for directors), set up the right taxes, open a business bank account, check business rates and licences, and use the free support London offers. The main thresholds to know are £1,000 of trading income for Self Assessment and £90,000 of taxable turnover for VAT.
London is one of the easiest places in the world to register a company, and one of the more expensive places to run one. The registration steps are the same as anywhere else in England, but costs such as premises and business rates, and the amount of free support available, are different in the capital. This guide explains how to start a business in London step by step, with every fee and threshold taken from GOV.UK or the official body that sets it.
Figures are correct for the 2026 to 2027 tax year at the time of writing. Rules change, so check the linked official page before you file anything, and speak to an accountant if your situation is not straightforward.
Step 1: Choose Between Sole Trader And Limited Company
The first decision is your legal structure. GOV.UK’s guide to business legal structures sets out the core difference. As a sole trader, you are personally responsible for all the debts of the business. In a limited company, owners are responsible for its debts only up to the value of their investment, but the company must be registered before it trades and must file accounts and company tax returns.
Factor
Sole Trader
Limited Company
Liability
Unlimited: you are personally liable for business debts
Limited to the money you invested
Registration
Register with HMRC for Self Assessment
Register with Companies House, then set up Corporation Tax
Set-up cost
Free
£100 online or £124 by post
Tax on profits
Income Tax and National Insurance through Self Assessment
Corporation Tax at 19% to 25% depending on profit
Ongoing admin
Annual tax return and records
Annual accounts, confirmation statement, company tax return
Public record
No public filing
Directors, owners and accounts are public
Many London founders start as sole traders to test an idea, then incorporate once profits grow or when clients, investors or landlords want to deal with a company. If you plan to raise investment, employ staff or sign large contracts, a limited company is usually the better starting point. Partnerships and limited liability partnerships are also available but are less common for new single-founder businesses.
Step 2: Register Your Business
Registering As A Sole Trader
GOV.UK says you must register for Self Assessment as a sole trader if you earn more than £1,000 from self-employment in a tax year, which runs from 6 April to 5 April. You can register earlier. The deadline is 5 October after the end of the tax year in which you started: HMRC’s registration page gives 5 October 2026 for the 2025 to 2026 tax year, and missing it can lead to a penalty.
Sole traders should also plan for Making Tax Digital. According to HMRC’s eligibility guidance, sole traders and landlords with qualifying income above £50,000 have had to use it since 6 April 2026. The threshold falls to £30,000 from 6 April 2027 and to £20,000 from 6 April 2028, so choosing compatible bookkeeping software from day one saves a switch later.
Registering A Limited Company With Companies House
You register a limited company with Companies House. It costs £100 online by debit or credit card, or £124 by post using form IN01, as confirmed in the Companies House fees schedule. You will need a company name, a registered office address in England or Wales, at least one director, details of shareholders and people with significant control, and a SIC code describing what the company does.
Identity verification is now part of the process. Companies House guidance on verifying your identity explains that identity verification became a legal requirement for directors and people with significant control from 18 November 2025, with a 12-month transition for existing companies. New directors can verify online through GOV.UK One Login using photo ID such as a passport or UK driving licence, in person at a Post Office, or through an authorised corporate service provider such as an accountant or solicitor. Where a company has more than one director, each director’s personal code is needed to register.
Before you choose a name, search the Companies House register to check it is not already taken. Once registered, the company must file a confirmation statement each year, which costs £50 online or £110 on paper, plus annual accounts.
Step 3: Set Up Your Taxes With HMRC
A limited company pays Corporation Tax on its profits. GOV.UK’s Corporation Tax guidance notes that you can set the company up for Corporation Tax at the same time as registering with Companies House; otherwise you add it later through your business tax account. The current rates are 19% for profits of £50,000 or less and 25% for profits above £250,000, with Marginal Relief in between.
VAT applies to both structures. You must register for VAT if your taxable turnover over the last 12 months goes over £90,000, or if you expect it to go over that figure in the next 30 days alone. Some businesses register voluntarily below the threshold to reclaim VAT on costs, which can make sense if most of your customers are VAT-registered businesses.
If you take on staff, including paying yourself a salary as a director, you need to register as an employer and run PAYE. For 2026 to 2027, HMRC’s employer rates and thresholds set employer National Insurance at 15% above £5,000 a year, with an Employment Allowance of £10,500 for eligible employers. You must also hold at least £5 million of employers’ liability insurance from your first hire, and the fine for not having it can reach £2,500 a day.
Step 4: Open A Business Bank Account
A limited company is a separate legal entity, so its money must be kept apart from yours, and in practice that means a business bank account in the company’s name. Sole traders are not legally required to have one, but most banks do not allow business use of a personal account, and a separate account makes bookkeeping and Self Assessment far simpler.
London founders can choose between high street banks, which often offer branch access and fee-free introductory periods, and app-based business accounts, which are usually quicker to open. Expect to provide your Companies House registration number, proof of identity and address for directors, and a short description of what the business does.
Step 5: Understand Business Rates And Premises
If you rent an office, shop or workshop, you will usually pay business rates to your London borough council. GOV.UK explains that rates are calculated by multiplying the rateable value by the multiplier, then deducting any relief. For 2026 to 2027 in England, the standard multiplier is 43.2 pence for properties with a rateable value below £51,000 and 48 pence from £51,000 up to £499,999, with lower multipliers for eligible retail, hospitality and leisure businesses. The City of London sets its own multipliers.
Small firms can often pay much less. Under small business rate relief, a business using one property with a rateable value of £12,000 or less pays no business rates, with tapered relief up to £15,000. In London, relief can continue after you take a second property if the total rateable value stays under £28,000, compared with £20,000 elsewhere in England. Several other business rates reliefs exist, so ask your council what applies.
Many London startups avoid business rates entirely at first by working from home or from a coworking space, where the operator pays rates and passes them on through the desk fee.
Step 6: Check Licences, Permissions And Data Protection
Some activities need a licence before you trade. Food businesses, alcohol sales, street trading, taxis, childcare, waste and many personal care services are all regulated. Use the GOV.UK licence finder to find licences, permits or certifications you may need, then apply through your borough council, since licensing is handled locally across London’s 32 boroughs and the City of London.
Almost every business handles personal data, even if it is only customer emails. The Information Commissioner’s Office says organisations, including sole traders, that use personal information need to pay a data protection fee unless they are exempt. Check your position on the ICO site when you set up.
Step 7: Use London’s Free Business Support
London has more free support for new businesses than anywhere else in the UK. Three good places to start:
Grow London Local. Run by London & Partners and supported by the Mayor, Grow London Local offers small businesses free access to expert support and advice, in person and online.
British Library Business & IP Centre. The Business & IP Centre at St Pancras offers free access to what it calls the UK’s largest collection of business and IP information, plus workshops, webinars and one-to-one support. Several London borough libraries run local centres too.
Start Up Loans. The government-backed Start Up Loans scheme lends up to £25,000 per person at a fixed 7.5% a year over one to five years, with 12 months of free mentoring.
Step 8: Build Your Professional Team
Most new London businesses need three kinds of outside help early on. An accountant keeps you compliant and can act as your authorised agent for Companies House identity checks; see our list of the top accountants for small businesses in London. A credible website is essential for winning customers and opening some bank accounts, and our guide to the top web design agencies in London is a good shortlist. When you are ready to grow, our list of the top digital marketing agencies in London covers firms that work with early-stage businesses.
Start-Up Costs At A Glance
Item
Official Cost Or Threshold
Source
Register as a sole trader
Free; required above £1,000 trading income
GOV.UK
Register a limited company
£100 online, £124 by post
Companies House
Annual confirmation statement
£50 online, £110 by post
Companies House
VAT registration
Required above £90,000 taxable turnover
HMRC
Corporation Tax
19% up to £50,000 profit, 25% above £250,000
HMRC
Employer National Insurance
15% above £5,000 a year
HMRC
Small business rate relief
100% relief up to £12,000 rateable value
GOV.UK
Start Up Loan
Up to £25,000 at 7.5% fixed
Start Up Loans
Frequently Asked Questions
How Much Does It Cost To Register A Company In London?
Registering a limited company with Companies House costs £100 online or £124 by post. The fee is the same anywhere in England and Wales. Registering as a sole trader with HMRC is free.
Do Directors Need To Verify Their Identity With Companies House?
Yes. Identity verification has been a legal requirement for directors and people with significant control since 18 November 2025. You can verify through GOV.UK One Login, at a Post Office, or through an authorised corporate service provider such as an accountant.
When Do I Need To Register For VAT?
You must register once your taxable turnover over the previous 12 months goes over £90,000, or if you expect to exceed it in the next 30 days alone. You can register voluntarily before then.
Can I Run A Business From Home In London?
Yes, many London businesses start at home. Check your tenancy or mortgage terms, and speak to your council if you will have customers visiting, staff on site or significant changes to the property, since business rates or planning permission can apply in some cases.
Where Can I Get Free Business Advice In London?
Grow London Local, run by London & Partners, and the British Library Business & IP Centre both offer free advice, workshops and one-to-one support. Start Up Loans also includes 12 months of free mentoring with each loan.
Conclusion
Starting a business in London in 2026 is quick and inexpensive on paper: a sole trader registration is free and a limited company costs £100 online, with identity verification now built into the process. The real work is in getting the structure right, registering for the taxes that apply, keeping your finances separate and checking rates, licences and data protection before you trade.
Use the free support the capital offers, keep the official GOV.UK pages bookmarked, and bring in an accountant early. For vetted London providers and more practical guides, visit our London services hub.
