England, and the UK as a whole, is often recognised for its strong entrepreneurial spirit - earning it the reputation of a ‘nation of shopkeepers'. Entrepreneurship remains a significant driver of the country's economy and plays a crucial role in shaping England's commercial landscape. Starting a business in England is generally streamlined and hassle-free. However, the specific steps you'll need to take to set up your business can vary based on factors such as your chosen industry, the size of your enterprise and your desired business location.
How to plan your business venture in England
Before you set up a business, you should conceive the business idea, think about how you will finance it, and focus on creating your business plan.
Conducting market research will help you understand whether there's a gap in a specific sector and how you can address it.
It is also important to decide whether you want your business to operate online (possibly from your home) or have a physical location.
Good to know:
London boasts the highest ratio of businesses to residents in the UK, with 1,370 companies for every 10,000 residents (based on 2024 data).
It's worth noting that a non-resident or non-British can open and own a business in England since there's no need to live there to run a UK business. However, what's necessary is to register your business to an address in England for accountability and correspondence purposes. You can register your business with Companies House after you have obtained an address in the country. You can rent a property, use a friend's or family member's property, or the address of someone who agrees to lend you their address to help you register your business.
Business structure in England
To open a business in England as an expat, you must decide the business structure (see above), register the business, and apply for a corporate bank account. A lot of the steps can be completed online.
The business structure you choose affects how you pay tax and your legal responsibilities. You can register your business as a sole trader, a partnership, a limited liability partnership (LLP) or a limited company. Each business structure has its pros and cons, and it's up to you and your partners (if you have any) to decide the most suitable for your situation.
Most businesses in England register as a sole trader or limited company, but there are other ways to set up a business, and you can move from one business structure to another. It's usually easier to move from being a sole trader to a limited company.
Sole traders
A sole trader is the simplest business structure to set up and keep a record for. If you choose to register your business as a sole trader, it means that legally, you and your business are considered one entity. Meaning, you make all the business decisions and keep all the profits after paying tax.
In practical terms, this implies that if your business faces a lawsuit, you, as the owner, are personally liable, and your personal assets (such as property and car) could be used to settle any debts.
Generally speaking, setting up as a sole trader is easy. However, growth opportunities are limited because banks and investors prefer limited companies, which are considered more credible.
Here are some of your responsibilities as the owner of a sole trader company:
- Keep a record of business expenses and sales;
- Carry out your tax return self-assessment yearly;
- Pay your income tax with Class 2 and Class 4 national insurance and use the HMRC's calculator for budgeting this.
Good to know:
A sole trader must submit an annual self-assessment tax return for the preceding tax year. His tax returns are not public, and business figures are private. Sole proprietorships make up the majority of businesses in England, accounting for 56%.
Limited companies
A limited company is legally separate from the people who own it, and is run by one or more directors. There are a number of responsibilities and things to consider when running a limited company.
Limited companies don't pay income tax as sole traders do, but pay corporation tax on their profits - 19% for profits up to £50,000 and 25% for profits over £250,000 (with marginal relief for profits in between). This tax is paid within nine months after the company's accounting year ends. Limited companies are entitled to tax deductions, meaning they are more tax-efficient and profitable.
However, setting up a limited company is more challenging since it requires a list of documents. The list is extensive but includes things like proof of identity, address, director and shareholder details, a Memorandum of Association, SIC code, office address, PSC register, corporation tax registration and more. In addition, a limited company's director has fiduciary responsibilities that they must meet by law.
Last but not least, limited companies must disclose their earnings publicly for transparency reasons.
Good to know:
When you register a limited company's name, nobody else can use it.
Differences between sole trader and limited company
The table below shows the main differences between being a sole trader and a limited company:
Sole trader | Limited company | |
Legal risks or ‘liability' | You are personally responsible for all of the debts of the business. This is called ‘unlimited liability'. If something goes wrong, you may need additional business insurance. | Company owners are responsible for the debts of the business only up to the value of their financial investment. This is called ‘limited liability'. A limited company may give you protection if things go wrong, but you may need additional business insurance. |
Finances | You keep all the profits after paying tax. | Directors need to follow rules when taking money out of a limited company (for example, paying yourself a salary, dividends or a directors' loan). |
Name | You can choose a trading name or use your own name. | There are rules to follow when choosing a name for a business. |
Keeping records and accounts | When you start trading you must keep records. For sole traders earning above £50,000 annually, you must comply with Making Tax Digital requirements for income tax reporting. | Directors need to follow the rules when running a limited company and must file accounts and tax returns for the company. |
Registering | You can start trading straight away without registering. However, you should register for Self Assessment as a sole trader if you earn more than £1,000 in a tax year (from 6 April to 5 April). You can choose to register earlier. | Company owners need to register the company before they begin trading. You'll register when setting up as a limited company. You may want to register even if you plan to leave your company dormant. |
Income tax | You may need to pay Income Tax on your profits. You pay this through your Self Assessment tax returns. | Directors may need to pay Income Tax depending on how they take money out of a limited company (for example, paying themselves a salary, dividends or a directors' loan). |
National Insurance (NI) | You may need to pay NI contributions depending on your profits. You can choose to pay these to qualify for certain benefits and the State Pension. | Directors may need to pay NI contributions depending on how they take money out of a limited company (for example, paying themselves a salary, dividends or a directors' loan). |
VAT | You need to register for VAT if your taxable turnover exceeds £90,000 in any 12-month period. | The company needs to register for VAT if its taxable turnover exceeds £90,000 in any 12-month period. |
Corporation tax | Sole traders do not pay Corporation Tax. | The company will need to pay Corporation Tax on any profits. |
Tax relief | There are tax reliefs for sole traders. | There are tax reliefs for limited companies. |
Employment status | You will be classed as ‘self-employed'. | Company directors may be employees of the company or office holders. |
Taking on employees | You can have employees. | The company can have employees. |
Other ways to set up a business
Check if you should set up as one of the following instead:
- A business partnership;
- A social enterprise;
- An overseas company;
- An unincorporated association.
A partnership is no different from a sole trader. However, the business is run in collaboration with more than one person.
Before sealing a partnership, evaluate the other person or people as much as possible and consider the qualities and values you want them to have (e.g., passion, responsibility, creativity, open-mindedness, etc.).
You don't have to be friends with your partner(s), but there has to be a significant level of trust and confidence that they work towards the best interest of your business.
Good to know:
In a partnership business, if one partner vanishes or dies, the other partner or partners must pay the business's debts.
Register your business in England
To fully register your business and ensure you pay the correct tax on your earnings, you must register your business with the HM Revenue & Customs (HMRC).
After that, you will receive confirmation and your unique tax number. It is a requirement for all industries to pay a yearly tax sum, which starts in April of the preceding tax year. The amount you earn and the type of company you own define the value of your tax.
For more tax information, visit the HMRC and the local council office. If you are not in the UK yet, you can contact the Chambers of Commerce in your country.
Good to know:
The local council and Chambers of Commerce provide advice, mentoring programs and financial support for your projects. You might also be eligible for several grants and bursaries available for business in the UK. Still, it depends on your location, the products or services you are offering, and your profile (group, young people, financial background, etc.)
You are expected to pay income tax when you have earned more than £12,570 in a financial year.
VAT companies in England
Upon earning more than £90,000 in a calendar year, you must register as a VAT company and correspondingly start charging the right amount of VAT for your work (unless you sell tax-exempt products or services).
Note that you cannot charge VAT on your invoices before receiving your tax number from HM Revenue and Customs. The corporate VAT is at 20%.
Your responsibilities include:
- Keeping your company records and reporting changes to the HMRC and the Companies House;
- Filing of accounts with Companies House and company tax returns with HMRC;
- Paying corporation tax register for self-assessment and personal self-assessment tax return yearly (unless it is a non-profit organisation).
Important:
As a sole trader, you don't own a VAT (tax) company. However, if your company generates more than £90,000 in the preceding tax year, you will be required to register as a VAT company.
A tax rate of 20% is applicable for income between £12,571 and £50,000. A higher rate of 40% will be for income between £50,001 and £150,000.
Insuring your business in England
Having a business means that you will have to insure it against risks such as damage, legal fees, employee accidents, etc. There are different types of insurance depending on the type of business you have.
If you have set up a sole trader business, a good solution is to purchase self-employed health insurance for access to health professionals.
If you have employees, it's a legal requirement to get Employer's Liability (EL) insurance. The policy you will purchase from an authorised insurer must cover you for at least £5 million. This insurance will pay for your compensation to an employee who was injured at work or became ill due to the type of work they did for your business.
Every day you have been running your business and employing employees but haven't been insured, you may pay a fine of £2,500. Employer's Liability is an expensive insurance. Hence, you may want to hire an insurance broker to help you buy it.
You should also consider business asset insurance, which protects your company's physical property - including buildings, assets, stock and contents - against risks like fire, theft, flood and damage. While not legally required (unlike Employer's Liability insurance), it's highly recommended and often required by landlords or lenders, with costs varying based on the value of your assets and the level of coverage you choose.
Good to know:
You may not need Employer's Liability insurance if you employ a family member or someone based abroad.
How to run a business in England
Running a business in England successfully means juggling several important tasks.
First, consider hiring an accountant, as they can help you understand tax rules and handle your yearly tax returns. This is especially useful when you're starting out and learning the ropes.
To grow your business, consider your marketing strategy. You need ways to attract and keep customers, so plan your marketing - use social media to connect with your audience and get feedback, and importantly, be ready to adapt. If your brand isn't working, don't be afraid to change it.
Another thing you should do is stay informed: keep an eye on your competitors and see what they're doing well. Look for ways to stand out - what makes your business different? And stay creative as much as possible. Always think about new ideas and improvements.
Managing your finances correctly is, of course, essential. Ideally, you should use separate bank accounts for business purposes and personal expenses. Have a good record-keeping system and track everything. Use accounting software or apps to record income and expenses. Stay organised, as good records will make tax time much easier when the time comes round - and keeping business records over the years will be both helpful and time-saving in the case of a tax investigation.
Good to know:
For limited companies or LLPs, opening a corporate bank account to conduct transactions with customers or business partners is essential.
A UK company can have its bank account opened in another country.
The benefits of self-employment in England
Being self-employed involves some risks and a lot of hard work. However, there are significant benefits to being your own boss.
For example, you decide where and when to work, whom you want to work with, and the partnerships you want to develop. You charge the amount you think matches your work's type, size, and quality.
Good to know:
You can work full-time for an employer and run your own business in the evenings.
Do you need a visa to set up a business in England?
This depends on your situation. If you're not planning to live in England and will run the business remotely, you may not need a business visa.
However, if you want to live in the country as an expat and run your business, you'll need the appropriate visa. Expats can apply for an Innovator Founder Visa - this visa type allows non-UK residents to come to the country to set up and run their own business, as long as they meet the following criteria:
- The business must be innovative, viable and scalable.
- They need endorsement from an approved body.
- They need at least £1,270 in your bank account for 28 consecutive days.
- They must prove B2 level English proficiency.
- No minimum investment requirement in 2025.
- Application fees: £1,274 from outside England or £1,590 from inside England.
However, Innovator Founder Visa holders cannot take external employment - they must work solely on their endorsed business.
Useful links:
Self-employment and starting a business
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