How To Start a Small Business in the UK: Step-by-Step Guide
- Published: 7 March 2025
- 10 min read
- Starting a Company, Tax & VAT
Heather Cameron
Author
Heather believes in the power of great storytelling and is here to craft compelling copy that informs and inspires readers. With an extensive background in digital marketing, she has experience writing for various industries, from finance to travel. As Osome’s copywriter, Heather creates content that empowers entrepreneurs and small business owners to boost their business with expert guidance, helpful accounting tips and insights into the latest fintech trends.
Yinghua Luo
Reviewer
Yin Luo is our Operations Manager based in the UK. She keeps our UK team running like a well-oiled machine and ensures our content resonates with our British audience. Before moving to operations, Yin had over 10 years of accounting experience and is an ACCA-qualified accountant. In her current role, she is our go-to expert for making complex topics easy to understand. Yin carefully reviews our UK-focused articles, ensuring they are accurate, relevant, and packed with actionable advice to help your business thrive on this side of the pond.
Wondering how to start a small business in the UK? This guide will take you through each essential step, from refining your business idea to meeting legal requirements. Follow these steps to start your small business successfully and be your own boss.
Key Takeaways
- Define your small business according to UK criteria to effectively navigate legal and financial landscapes.
- Follow a structured approach starting with business research and a solid business plan to enhance your chances of success.
- Understand your legal obligations and implement CRM strategies to maintain strong customer relationships and streamline operations.
What Is a Small Business in the UK?
In the UK, a small business is defined by specific criteria that differentiate it from larger enterprises. A business qualifies as ‘small’ if it meets two out of three criteria set by Companies House: a turnover of £10.2 million or less, a balance sheet total of £5.1 million or less, or having 50 employees or fewer. Additionally, micro-entities are even smaller, with a turnover of £632,000 or less, a balance sheet total of £316,000 or less, and 10 employees or fewer.
Small businesses in the UK benefit from certain exemptions and simplified regulatory requirements. For instance, they can file simpler accounts and, under specific conditions, avoid the need for audits.
If you’re starting or managing a small business in the UK, Osome’s company registration services can help you navigate these requirements effortlessly. Our team of professionals will ensure compliance while saving you time and resources. Let us simplify your journey to success.
10 Easy Steps To Start a Small Business in the UK
Starting a business in the UKinvolves a series of steps that ensure compliance with legal and financial obligations. Here is a step-by-step guide on how to start a small business in the UK:
Step | Description |
|---|---|
| 1. Define Your Idea | Start with a clear, problem-solving idea. Align it with your skills and understand how it will make money. |
| 2. Research the Market | Study customer needs. competition, and market trends using surveys and data. Use insights to refine your idea and strategy. |
| 3. Write a Business Plan | Outline goals, finances, and strategies. Use the plan to attract funding and guide your business. |
| 4. Choose a Structure | Pick between sole trader, partnership, or limited company. Consider liability, business taxes, and regulations. |
| 5. Register Your Business | Register your name with Companies House and comply with legal requirements. You must register for corporation tax within three months. |
| 6. Organise Finances | Open a business bank account, create a budget, and explore funding options like small business loans or grants. |
| 7. Pick a Name and Address | Open a business bank account, create a budget, and explore funding options like small business loans or grants. |
| 8. Find a Location | Secure premises that suit your business needs, considering costs, accessibility, and regulations. |
| 9. Build Your Brand | Develop a brand identity (logo, colours, tone) and a marketing plan. Use social media, ads, and pre-launch campaigns to attract customers. |
| 10. Launch Your Business | Create an online presence, host a launch event, and engage local media to build visibility and attract customers. |
Let’s break down these steps to make the process manageable and straightforward.
Step 1: Clarify your business idea
Every successful business starts with a great business idea, which drives the stamina and energy needed for success. Begin by identifying a problem to solve, which is crucial for attracting customers. If you want to start a new business, matching your skills to your idea also increases the likelihood of success.
Next, refine your idea by finding a niche and determining the value you will provide to customers. Developing a customer persona aids in effectively targeting the right audience.
Start a business the right way
Launching your dream business shouldn’t be stressful. From registering a name to filing returns, we’ve got your admin sorted so that you can focus on your business.
Finally, understand how to generate revenue, which is critical for financial planning. Seek professional advice if necessary to ensure your idea is viable and well-thought-out.
Step 2: Conduct Market Research
Conducting good research is a crucial step when starting a business. It helps you understand consumer preferences and behaviour, which can inform your business plan. Start by utilising formal data sources to validate market trends and consumer needs. Regular research also helps businesses adapt to changing consumer demands and industry trends.
Engage directly with potential customers through surveys to gain first-hand insights. Analysing your competition can reveal market gaps and unique selling points for your business. Online platforms like social media can provide valuable insights into customer opinions and preferences.
Compile your business research findings into a cohesive document to aid decision-making. Well-executed competitor research informs pricing strategies and enhances product offerings, contributing to success.
Step 3: Write a business plan
A well-crafted business plan is the foundation of your new entity. It defines your business’s vision and serves as a persuasive tool to attract funding from banks and investors.
Start by:
- Outlining your goals
- Confirming the financial math behind your business idea
- Identifying potential weaknesses in your idea
- Adjusting your plan to align with realistic financial projections
Explore various funding options tailored to your business needs to strengthen your financial projections. To secure funding, present a business plan to investors, who assess its viability and potential before providing financing.
A strategic business plan serves as a roadmap, detailing the objectives and strategies for your business type. This document will guide you through the initial stages, and help you stay focused on your goals.
Step 4: Choose your business structure
Your choice of business structure significantly impacts your legal responsibilities. In the UK, the main business structures are sole traders, partnerships, and limited companies. A sole trader is classified as self-employed and must register with HMRC for self-assessment as soon as trading begins.
In a partnership, all partners share responsibility for the business’s debts and profits, with one partner managing tax returns and record-keeping. Limited companies provide personal financial protection to shareholders, limiting their risk to the amount they invested. However, they also have increased reporting obligations and must file annual accounts.
Consider factors such as liability, tax implications, and regulatory requirements when choosing your ideal structure. Keep in mind that you can alter this structure at a later time. However, this change necessitates careful thought.
Step 5: Register your business
Registering your business formalises your venture. Begin by completing administrative tasks such as registering as self-employed and setting up an email. You can register a business name in the UK by creating an account on Companies House and checking the name availability.
Ensuring your business is legally compliant from the start will save you time and potential legal issues down the road.
During the registration process, it is important to understand the legal requirements for your sector. Additionally, consider the specific needs depending on your business type. Companies must register for corporation tax within three months of starting.
Step 6: Set up your finances
As a small business owner, establishing your finances is crucial for maintaining financial health and simplifying tax processes. Opening a business bank account helps keep your personal finances separate. You’ll need proof of identity, address, photographic ID, and company registration details(if applicable) to open an account.
A budget is essential for managing startup funds and planning for future expenses. Utilise invoice and billing software, or accounting software to streamline financial record-keeping. A good accounting software helps monitor financial transactions and startup costs.
Kickstart your entrepreneurial journey. Open a bank account now.
As part of getting your business off the ground in the right way, we connect you with one of our partners to open a bank account best suited for your business in the UK
Consider common methods to finance your own business ideas, such as obtaining small business loans, grants, or venture capital. Venture capital funds can provide significant funding in exchange for equity, often helping offset startup costs.
Step 7: Select a business name and address
Selecting a business address and name is pivotal for establishing your brand identity. Ensure no established business in the industry is already using your chosen name. Business names must not convey an offensive meaning or suggest unauthorised connections to government bodies.
A memorable is essential for standing out in the market especially if you run a small business. The name should be distinctive and adhere to the set legal requirements. Additionally, you can use a different trading name instead of your registered company name, as long as it complies with specific regulations.
Step 8: Secure business premises
Securing the right business premises is crucial for your business’s operational success. The location of your business can significantly impact financial success.
When deciding on a business location, consider factors such as taxes, zoning laws, regulations, legal fees, costs, and tax benefits.
The location also influences customer accessibility and operational costs. Ensure your business premises align with your business activities and provide a conducive environment for growth.
Step 9: Branding and marketing strategy
A robust branding and marketing strategy is key to reaching your target audience and building brand recognition. Branding includes business identity, logo, brand colours, and tone of voice. Branding aims to create a memorable identity that stands out.
Your marketing plan should cover social media, advertising campaigns, and public relations. Consider your offerings and target audience when determining your advertising approach. Effective marketing helps small businesses reach new customers and build brand recognition.
Step 10: Launch your business
Finally, launch your new business with a name that clearly identifies the company. It should also resonate with its target audience. With the name, create an online presence with an intuitive website that provides the necessary information.
A unique launch event can generate significant initial interest and visibility for your business. With a well-planned launch and engaging local media, you can attract potential customers, even with minimal marketing efforts.
Legal and Tax Obligations
Grasping tax and legal obligations ensures many entrepreneurs remains compliant. Tax is levied on profits of limited companies, with rates varying based on profit amounts.
Value Added Tax (VAT) applies to sales of goods and services, with a standard rate of 20%, and businesses must register if turnover surpasses £90,000.
Keeping meticulous records of income and expenses facilitates accurate tax filings. A tax expert can offer significant time and cost savings in tax planning and preparation.
Customer Relationship Management
Customer Relationship Management (CRM) plays a pivotal role in maintaining and enhancing customer relationships. CRM software helps store and manage prospect and customer information, streamlining tasks like data entry. Implementing CRM software can facilitate better communication with clients by providing quick feedback and support.
Tools like HubSpot or Pipedrive offer management of marketing, sales, and customer service. Since employee experience directly influences customer experience, equipping staff with user-friendly CRM tools is essential. A solid CRM approach can identify customer behaviours and preferences, aiding in the creation of tailored marketing campaigns
Ready to start your business in the UK? Osome’s streamlined company registration services ensure your business is set up quickly and compliantly, so you can focus on your business. Contact us today to get started and build a strong foundation for your business!
Summary
Starting a small business in the UK involves several steps, from clarifying your business idea to launching your venture. Each step is designed to help you navigate the complexities of starting a business, ensuring you are well-prepared to tackle any obstacles that come your way. Understanding your legal and tax obligations, and implementing effective customer relationship management, are crucial for long-term success.
Remember, persistence and planning are key to turning your small business into reality. Stay focused, stay motivated, and take the leap into the exciting world of small business ownership.
FAQ
Which business is easiest to start in the UK?
Starting a handyman or garden clearing service is one of the easiest businesses in the UK, as it allows you to offer valuable help to those in need. Embrace this opportunity and get started today!
How do I start a business with no money UK?
You can be a small business owner with no money by beginning small and utilising free or affordable digital services. Explore separate business ideas like dropshipping or affiliate marketing, and always look for ways to reduce costs while testing your model as a side hustle. You can also look for small business loans to stay afloat
What qualifies as a small business in the UK?
A small business in the UK qualifies by meeting two out of three criteria: a turnover of £10.2 million or less, a balance sheet total of £5.1 million or less, or up to 50 employees. Embrace this definition to confidently navigate your journey!
Why is market research important for starting a business?
Conducting research helps reveal consumer preferences and behaviors, allowing for informed decisions on pricing and product development. By understanding the target market, most businesses are set up for success right from the start!
What are the main business structures in the UK?
The main structures in the UK are sole traders, partnerships, and limited companies, each offering unique responsibilities and tax implications. Choose the right structure that aligns with your goals and start your entrepreneurial journey with confidence!
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