If you are thinking about starting a business in the UK for the first time, it is completely normal to feel a little unsure about where to begin. Many people assume there is a long, complicated list of forms, costs, or permissions you need before you are “allowed” to start. The good news is that the basic setup is often much simpler than you might expect.
This guide is written for complete beginners. It explains, in plain English, what starting a business actually involves, where you need to go, and what you need to do first. If you are planning to run your business in Farnborough or elsewhere in the UK, the same rules apply.
How Do You Actually Set Up a Business in the UK? (The Simple Version)
Let’s strip everything back to the essentials. Setting up a business in the UK usually comes down to just a small number of steps. You don’t need to get this perfect straight away, but it helps to know what’s coming.
Most people will need to:
- Decide what you are going to do and how you will make money.
- Choose whether you will operate as a sole trader or a limited company.
- Register with the correct organisation at the right time.
- Start keeping basic financial records from day one.
For sole traders, registration is done through HM Revenue & Customs (HMRC), and for limited companies, it’s done through Companies House. You do not need to complete all of this on the same day, and you certainly don’t need everything perfectly organised before you begin. What matters is understanding which steps apply to you and making sure they are completed correctly and on time.
How Old Do You Need to Be to Start a Business in the UK?
This is a common question. There is no single minimum age that completely prevents someone from starting a business in the UK. However, your age does affect what you can legally do, particularly when it comes to things like company directorships, contracts, and finance.
If You Are Under 16
If you are under 16, you cannot be a director of a limited company. You can operate as a sole trader, but it’s important to be aware of some limitations. For example, contracts signed by minors are generally not legally enforceable, and banks are usually unwilling to deal directly with minors. In practice, this often means a parent or guardian may need to sign contracts on your behalf.
If You Are 16 or 17
Once you are 16 or 17, you can legally be a director of a limited company. However, some practical restrictions can still apply, such as difficulty opening a business bank account without an adult co-signer. Because of this, many people in this age group still choose to operate as sole traders.
If You Are 18 or Over
Once you are 18, there are no age-related legal restrictions on running a business in the UK. You can register, open accounts, and sign contracts in your own name.
What Does “Starting a Business” Actually Mean?
In the UK, “starting a business” doesn’t begin with paperwork. It begins the moment you start carrying out activities with the intention of making money. This is often referred to as ‘trading’.
This can include activities like:
- Selling goods or services
- Advertising what you do
- Issuing invoices
- Taking payments from customers
Simply planning, researching, or learning doesn’t count as trading. But once you begin operating, certain responsibilities follow, even if your business is small or part-time.
Choosing a Business Structure (Brief Overview)
Before you can register, you’ll need to decide how your business is structured. Many people find this confusing at first, but for most beginners, it comes down to a choice between being a sole trader or a limited company. This decision affects how you register, how your tax works, and how much administration is involved. At this stage, it’s enough to understand that a choice is required.
Registering Your Business (At a High Level)
This part often sounds more complicated than it really is. You don’t need to register a business just because you have an idea; registration becomes relevant once you start trading.
- Sole traders need to register with HMRC for Self Assessment. You must do this by 5 October after the end of the tax year in which you started trading. For example, if you start your business in May 2025 (which is in the 2025/26 tax year), you must register by 5 October 2026.
- Limited companies must be registered (or ‘incorporated’) with Companies House before they can legally start trading.
Leaving registration too late is a very common beginner mistake, and it can lead to penalties, so it’s a good deadline to be aware of.
Keeping Basic Records From Day One
Once you start your business, UK law requires you to keep accurate records of your income and expenses. This is something many people feel unsure about at first, but it’s one of the most important basics to get right.
At a basic level, this just means keeping track of:
- All money coming in (your sales and income)
- All money going out (your expenses)
- Invoices and receipts
- Bank statements
There is no legal requirement to use an accountant or bookkeeper. What matters is that your records are accurate, organised, and available if HMRC ever asks to see them.
Understanding Tax Without the Jargon
Tax often feels intimidating when you first start a business, mainly because it works very differently from employment. When you run a business, tax isn’t automatically deducted from your income. Instead, you are responsible for setting money aside to pay your tax bill, which is usually paid after the income has been earned.
The exact taxes you will pay depend on your business structure, but at this stage, awareness and planning are more important than understanding every single detail.
Business Bank Accounts and Separating Your Money
Because a limited company is a separate legal entity from its owners, you are legally required to keep its finances completely separate from your personal money. While the law doesn’t explicitly state you must open a ‘business bank account’, it is the standard and most practical way to meet this legal requirement. Trying to manage company finances through a personal account would make it very difficult to maintain the required separation and could lead to legal and tax complications.
Sole traders are not legally required to have a separate business bank account, but many choose to open one anyway. This is not about formality; it’s about making things easier for yourself. Separating your money helps you keep clear records and see how much your business is earning.
Common Early Mistakes to Avoid
Most early problems are caused by simple misunderstandings, not bad ideas. It’s helpful to know what they are so you can avoid them.
Common mistakes include:
- Not registering at the right time
- Mixing personal and business finances
- Failing to keep records from the start
- Spending money that should have been set aside for tax
- Trying to do everything perfectly on day one
Starting small and learning as you go is often the safest and calmest approach.
When Getting Advice Can Help
You are not required to get professional advice to start a business, and many people do a lot themselves in the early stages. However, advice can be helpful when you are unsure which structure to choose, your income starts to grow, or you just want some reassurance that you are meeting your responsibilities.
If you would like calm, practical support as your business develops, Penney’s Accountancy works with UK small businesses in Farnborough and the surrounding areas, helping owners understand their responsibilities and make confident decisions at every stage.
Want to Learn More in Your Own Time?
For those who want to build their confidence and understand these topics in more detail, Penney’s Finance School offers an online, self-paced business and finance course. It covers everything from company setup to cash flow and tax, allowing you to learn at your own pace.
Important information
The information provided in this article is intended as general guidance for UK businesses only and reflects UK tax legislation and HMRC guidance as of February 2026.
Tax rules and business requirements can change, and individual circumstances vary. Before acting on any of the information above, we recommend speaking to a qualified accountant who can provide advice tailored to your specific situation.