Startup Insight

How To Start A Business Uk?

Jun 6, 2024 | By Startup Rise EU

To start a business in the UK the first step is Clarify your business idea, identify potential problems, set goals, and track your progress.  Including your objectives, strategies, sales, marketing, and financial forecasts.

According to data from Companies House, there has been a significant increase in the establishment of new businesses amid the current recession in the U.K. Despite the economic challenges, these startups promise to speed up the recovery process. Starting a business in the United Kingdom comes with many benefits.

SUMMARY

  • Set up a business in UK.
  • According to data from Companies House, there has been a significant increase in the establishment of new businesses amid the current recession in the U.K.
  • Starting a business in the United Kingdom comes with many benefits

With low taxes and business-friendly regulations, the country offers a favourable business environment. Its strategic location and strong connectivity make it an ideal point to enter European markets. Also, benefiting from several free trade agreements, the UK simplifies and reduces the cost of importing and exporting goods.

Starting a business in the U.K. may seem challenging, but it is possible with the right strategy. This article will discuss the important steps to starting your own business in the U.K. We will talk about the schemes and regulations for starting your own business in the U.K. and how to start a business in the U.K. as a foreigner. Putting effort into these foundational steps is important because it shapes all future endeavours.

Write a business plan

A business plan is a written document that outlines your business, including your objectives, strategies, sales, marketing, and financial forecasts. It helps you clarify your business idea, identify potential problems, set goals, and track your progress.

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Why do you need a business plan? You need a business plan to get an investment or a loan from a bank. You can learn about business finance options on the Business Finance Guide website. A business plan can also help persuade customers, suppliers, and potential employees to support you.

Set up a business in the UK

Setting up a business depends on your type of business, location, and whether you hire help. Here are the steps you'll need to follow:

  • Start by registering your business. Most businesses are registered as one of the following:

Sole trader: This is the easiest to set up. However, you are personally responsible for your business's debts. You also have some accounting duties.

Limited company: This separates your business's finances from your personal finances but involves more reporting and management tasks. You can either set it up yourself or hire a professional, such as an accountant.

Partnership: This is the simplest way for two or more people to run a business together. You share responsibility for the business's debts and accounting duties.

  • Follow the rules for your type of business.

You have to follow the rules if you sell goods online, buy goods from abroad or sell goods abroad, store or use personal information, etc. You may need this, depending on what your business does.

-Licences or permits, such as playing music, selling food, trading on the street, etc.

- Insurance.

  • Where does your business operate from?

Your responsibilities are different if you run your business from home or rent space for your business. If you rent or buy a property, you may have to pay business rates. Small businesses can apply for exemptions on these rates, and some may not have to pay at all. Check if you can claim expenses for an office, property, and equipment.

  • Hiring help and becoming an employer.

If you hire agency staff or freelancers, you are responsible for their health and safety. If you employ your own staff, you have additional duties such as running the payroll, paying for their national insurance (with allowances to reduce this bill), and providing workplace pensions to eligible employees.

Working for yourself

If you start working for yourself, you are considered a sole trader, which means you are self-employed even if you haven't notified HM Revenue & Customs (HMRC).

  • You are self-employed if you:

-        run your own business and take responsibility for its success or failure.

-        have multiple clients at once.

-        decide how, where, and when you work.

-        hire people to work for you at your own expense.

-        provide the main equipment needed for your work.

-        are responsible for fixing any unsatisfactory work in your own time.

-        charge a fixed price for your work.

-        sell goods or services to make a profit.

  • If you own a limited company, many of these points also apply. However, HMRC does not classify you as self-employed. Instead, you are both the owner and employee of your company. You can be both employed and self-employed at the same time, for example, if you work for an employer during the day and run your own business in the evening.

You can check whether you are self-employed by using the online "Check employment status for tax" tool or by calling HMRC.

  • Selling goods or services

If you sell goods or services, you may be considered a trader, which means you are self-employed. If you:

-        regularly sell to make a profit.

-        make items to sell for a profit.

-        regularly sell items online, at car boot sales, or through classified ads.

-        earn commission from selling goods for others.

-        get paid for a service you provide.

If you sell items only occasionally or rent out property, such as through auction websites or short-term rental apps, check whether you need to report this income to HMRC. If you are unsure whether you are trading, contact HMRC for advice.

  • Registering as Self-Employed

If you're self-employed, you might need to register as a sole trader. There are other business structures you can choose from, such as becoming a partner in a business partnership or setting up your own limited company.

Employing staff for the first time in UK

Here are 7 steps to follow when you hire your first employee:

  1. Decide on a salary. You must pay at least the national minimum wage.
  2. Check if the person has the legal right to work in the UK. You might need to do other employment checks too.
  3. See if you need a DBS check, especially if you work with vulnerable people or in security.
  4. Get employers' liability insurance as soon as you hire someone.
  5. Provide a written job description, including terms and conditions, if the employment lasts more than a month.
  6. Register as an employer with HM Revenue and Customs (HMRC). You can do this up to 4 weeks before paying your new staff.
  7. Check if you need to automatically enrol your staff in a workplace pension scheme.

Growing your business in UK

  • Growth planning

Once your business is established and profitable, it's time to consider how to grow. While many businesses focus on increasing sales, maintaining or improving profitability is also important. Here are some steps to help you grow your business:

-  Increase sales to both existing and new customers.

-  Improve your products and services by researching and testing changes with your customers.

-  Develop new products and services and sell them in new or existing markets.

-  Hire new staff or train your existing team, including working with apprentices and consultants.

-  Seek additional funding sources, such as new investors.

- Consider selling your products or services online.

-  Work with a business consultant to help you plan and execute these strategies.

As your business grows, you'll need to register for VAT if your taxable turnover is more than £90,000. You may also find that a different legal structure is better suited to your business.

Get help and support for your business in UK

Your business can receive advice and financial assistance from government-backed schemes. Enter your details and choose the type of support you need. You can also get help with tax, exporting, and writing a business plan.

If you're unemployed or on benefits, your Jobcentre Plus work coach might offer extra help. You can also contact ACAS (Advisory, Conciliation, and Arbitration Service) for confidential advice on employment law. You can also find free advice and sources of finance through your local ‘Growth Hub’.

  • Apply for a start-up loan for your business.

Apply for a government-backed start-up loan of £500 to £25,000 to start or expand your business. Unlike a business loan, this is an unsecured personal loan, which will require you to undergo a credit check. You will get free support and guidance to prepare your business plan, and successful applicants can benefit from up to 12 months of free guidance.

Before you apply, make sure the following criteria are met:

-  You live in the UK.

-  You are 18 years of age or older.

- You currently operate or plan to establish a UK-based business that has been fully operational for less than 36 months.

  • Fees and repayment:

Start-up loans are backed by the government and have a fixed interest rate of 6% per year. The repayment tenure ranges from 1 to 5 years, with no application or early repayment fees.

Set up a limited company in UK(step by step)

Setting up a limited company involves appointing directors and shareholders or guarantors and completing tax registration.

Step 1: Check if establishing a limited company is suitable for your business. Assess what is involved in a private limited company and what its tax and financing implications are. Consider alternative business structures such as self-employment, partnerships, social enterprises, offshore companies, or unincorporated associations. Seek guidance to determine the most suitable setup.

Step 2: Choose a name for your company. Follow company name rules, confirm name availability, and check existing trademarks to avoid infringement.

Step 3: Select directors and, optionally, a company secretary. Appoint at least one director, understanding their responsibilities. Determine eligibility criteria for directors and company secretaries.

Step 4: Determine shareholders or guarantors. Identify at least one shareholder or guarantor, who may also be a director. Understand share issuance requirements and the taxation of dividends.

Step 5: Draft the necessary documentation outlining company governance. Prepare the Memorandum of Association and Articles of Association to define company operations.

Step 6: Establish record-keeping procedures. Understand the mandatory company and accounting records to maintain.

Step 7: Register your company. Provide an official address and choose a Standard Industrial Classification (SIC) code to classify your business activities. Complete the registration with Companies House, usually concurrently registering for corporation tax. If not possible, register separately with HM Revenue and Customs (HMRC) for corporation tax after Companies House registration.

Essential Steps for Foreign Individuals Starting a Business in the U.K.

  1. Legal Status:

EU individuals residing in the U.K. before January 1, 2021, can use the EU Settlement Scheme for Business. Others require a work visa.

  1. Visa Application:

Apply for the appropriate visa.

-        Innovator Visa: For innovative concepts with a £50,000 investment and English proficiency.

-        Start-up Visa: Similar, without a minimum investment.

-        Global Talent Visa: For individuals skilled in specific fields.

  1. Business Plan Creation:

Draft a comprehensive plan, usually involving a private company limited by shares.

  1. Business Bank Account:

While not mandatory, opening a U.K. business bank account streamlines financial transactions and tax compliance, reducing costs.

  1. Company name and address:

Decide on a name and address for tax and registration; consider trademark registration for protection.

  1. HMRC registration:

Register annually with HM Revenue & Customs for tax compliance and obtain a Unique Tax Reference (UTR) number.

  1. Business insurance:

Consider obtaining insurance for market protection and peace of mind in unforeseen events.

These steps ensure legal compliance and operational ease for foreign individuals starting a business in the UK.

Foreign company registration with Companies House in UK:

Registration requirement: mandatory for foreign companies established or frequently operating in the UK, except partnerships and unincorporated bodies. Contact DBT for guidance.

Exemption criteria: not necessary if not based in the UK. Register for corporation tax with HMRC for property partnerships.

Registration process: Submit Form OS IN01 to Companies House within one month along with the required documents and £71 fee.

Updating details: notify Companies House immediately of any changes.

Support from DBT: Get guidance from the Department of Trade and Business on UK business operations, market analysis, and networking.

Conclusion

If you have an idea to start a business, you can start it with the help of the information available in this article. All you need is the passion to execute your business plan and an eye to understand the market needs.

Although the UK is going through a crisis, it is still a fertile ground to start your own business as the location of the UK offers many advantages to businesses to connect and flourish internationally.


Why start a business in the UK?

Starting a business in the United Kingdom comes with many benefits. With low taxes and business-friendly regulations, the country offers a favourable business environment. Its strategic location and strong connectivity make it an ideal point to enter European markets. Also, benefiting from several free trade agreements, the UK simplifies and reduces the cost of importing and exporting goods.


How to set up a limited company in the UK?

Setting up a limited company involves appointing directors and shareholders or guarantors and completing tax registration.


How to take start-up business grants in the UK?

Your business can get advice and financial support from government-backed schemes. You can also get help with tax, exporting and writing a business plan. You can also find free advice and sources of finance through your local ‘Growth Hub’.

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