From Companies House registration to your first invoice in under two weeks. A practical guide with the exact steps, costs and decisions — plus the mistakes that cost new contractors thousands.
If you have not made this decision yet, use these resources:
If you have decided a limited company is right for you, here are the ten steps to get trading.
Your company name must be unique — check availability on the Companies House name checker. It cannot be offensive, cannot imply a connection with government, and cannot use “sensitive” words (like “Royal”, “Bank” or “Insurance”) without permission.
Most IT contractors use either their own name (e.g. “J Smith Consulting Ltd”) or a brand name related to their specialism. The company name does not need to match your trading name — you can trade under a different name if you prefer.
The Standard Industrial Classification (SIC) code tells Companies House what your business does. Choose the one that best describes your primary activity. Common codes for contractors:
| SIC Code | Description | Best For |
|---|---|---|
| 62020 | Information technology consultancy activities | IT contractors, software developers, data engineers |
| 62012 | Business and domestic software development | Software engineers, app developers |
| 62090 | Other IT and computer service activities | IT support, infrastructure, DevOps |
| 70229 | Management consultancy activities other than financial management | Management consultants, project managers, business analysts |
| 69201 | Accounting and auditing activities | Finance contractors, FDs, accountants |
| 74909 | Other professional, scientific and technical activities | Catch-all for specialist consultants |
You can list up to four SIC codes. Getting this right matters for future Companies House filings and may affect how lenders and agencies categorise your business.
Every limited company needs a registered office address. This is publicly visible on the Companies House register. You have three options:
Your registered address determines which Companies House office handles your filings (Cardiff or Edinburgh), so use an address in the jurisdiction you want (England/Wales or Scotland).
A limited company needs at least one director (you) and one shareholder (also you — the same person can be both). You do not need a company secretary for a private limited company.
If your spouse will be a shareholder (to enable dividend splitting), decide the share allocation now. A common structure: you hold 80% of shares and your spouse holds 20%, or you create different share classes (ordinary and dividend shares) giving flexibility over future dividend distributions. Take specific tax advice before allocating shares — HMRC’s settlements legislation scrutinises arrangements with no commercial purpose beyond tax reduction.
Register online at gov.uk/limited-company-formation. The fee is £12 for online registration (or £30 by post). Online registration is typically approved within 24 hours — often the same working day.
You will need: your chosen company name, registered address, director details (name, date of birth, address, nationality), shareholder details and share allocation, SIC code(s), and a “memorandum of association” and “articles of association” (model articles are fine for most contractors and are provided automatically during online registration).
Once approved, you receive your certificate of incorporation and company number. Your company legally exists from this moment.
You need a dedicated business bank account — mixing personal and company finances is a compliance failure and makes accounting significantly harder. Popular choices for contractors:
| Bank | Setup Time | Monthly Fee | Notes |
|---|---|---|---|
| Starling Business | Same day | Free | Xero integration, no transaction fees |
| Tide | Same day | Free | Built-in invoicing, Xero integration |
| Mettle (NatWest) | 1–2 days | Free | Backed by NatWest, FreeAgent integration |
| HSBC Kinetic | 3–5 days | Free (18 months) | High-street credibility for mortgage applications |
Apply as soon as you have your certificate of incorporation and company number. The bank account is the critical path — you cannot invoice or receive payments without it.
When you incorporate online, Companies House notifies HMRC automatically. HMRC will send you a letter with your company’s Unique Taxpayer Reference (UTR) within 7–14 working days. You can also register proactively at gov.uk/register-for-corporation-tax within three months of starting to trade.
Your first corporation tax return (CT600) is due 12 months after your accounting period ends. Corporation tax payment is due 9 months and 1 day after the accounting period end date. For 2026/27, the small profits rate is 19% on profits up to £50,000.
Register as an employer with HMRC at gov.uk/register-employer. You will receive an employer PAYE reference within 5–10 working days. Once registered, you can run payroll — paying yourself the optimal director salary of £12,570 (for 2026/27).
Payroll must be submitted to HMRC via Real Time Information (RTI) on or before each payday. Your accountant handles this as part of your monthly service. Most sole-director companies run payroll monthly, paying £1,047.50 gross each month.
VAT registration is mandatory if your taxable turnover exceeds £90,000 in any rolling 12-month period. Below that, it is voluntary.
Voluntary registration can be beneficial if your clients are VAT-registered businesses (they reclaim the VAT you charge, so it does not cost them more) and you incur significant VAT-able expenses (you reclaim the VAT on purchases). It also adds a layer of professionalism. However, it adds admin — quarterly VAT returns — and if your clients are not VAT-registered (e.g. individuals), your prices effectively increase by 20%.
Register at gov.uk/register-for-vat. Your accountant advises on whether voluntary registration makes financial sense for your specific client base. For the full decision framework including flat rate vs standard scheme, see our VAT for contractors guide.
AccTek uses Xero as standard. Once your bank account is open, we connect your live bank feed so transactions flow in automatically. We configure your chart of accounts for contractor-specific categories, set up your invoice template, and connect payroll so everything is in one place.
Under Making Tax Digital, digital record-keeping is mandatory for qualifying income above £50,000 from April 2026. Xero is MTD-compatible out of the box. See our MTD knowledge hub for full details.
Once the setup is complete (typically 1–2 weeks), you are ready to trade. Here is what happens in month one:
Any business expenses incurred up to seven years before your company started trading are deductible — provided they would have been allowable had the company been trading at the time. This includes: company formation fees, initial accountancy advice, equipment purchased in anticipation of your first contract, training courses and certifications, and even travel to interviews that led to your first engagement. Gather these receipts and give them to your accountant at onboarding. For the full month-by-month timeline of your entire first year — including deadlines, penalties and tax-planning milestones — see our first-year contractor tax checklist. See our contractor expenses guide for more hidden savings.
ICAEW-regulated and led by Godwin Pinto ACA, AccTek handles the entire setup process for you. When you come on board, we take care of steps 2–10 above — you only need to choose your company name.
Whether you are an IT contractor, a freelancer, or a CIS subcontractor, we get you trading in under two weeks.
How much does it cost to set up a limited company?
Companies House charges £12 for online registration (same-day approval). Total first-month costs including bank account setup (free with most digital banks), accounting software and your first month’s accountancy fee are typically under £50. AccTek includes company formation in your onboarding at no extra charge.
How long does it take to set up a limited company?
Companies House online registration is approved within 24 hours. Opening a business bank account takes same-day to 5 days depending on the bank. HMRC sends your corporation tax UTR within 7–14 working days and your PAYE reference within 5–10 days. With AccTek handling the process, you are typically fully set up and ready to invoice within two weeks.
Can I set up a limited company while still employed?
Yes. There is no legal restriction on incorporating a limited company while employed. However, check your employment contract for restrictive covenants — some employers include non-compete or moonlighting clauses. You do not need to resign before incorporating; many contractors set up their company weeks before their first contract starts.
Do I need an accountant to set up a limited company?
Legally, no. You can self-register at Companies House for £12. Practically, having a specialist contractor accountant from day one saves you from the common mistakes listed above, ensures your tax structure is optimal, and handles all ongoing compliance. The accountancy fee pays for itself many times over through tax savings and avoided penalties.
What SIC code should I use as an IT contractor?
The most common choice is 62020 (Information technology consultancy activities). Software developers often use 62012 (Business and domestic software development). You can list up to four codes, so include your primary activity first and add secondary codes if you offer multiple services.
Should I register for VAT from the start?
Only if your turnover exceeds £90,000 (mandatory) or if voluntary registration benefits you financially. If your clients are VAT-registered businesses and you incur VAT-able expenses, voluntary registration lets you reclaim input VAT while your clients reclaim the VAT you charge. If your clients are not VAT-registered, your prices effectively increase by 20%. Discuss this with your accountant before deciding.
What happens if I close my limited company later?
You can close your company by striking off (free if no assets/liabilities) or by Members’ Voluntary Liquidation (MVL) if you have significant retained profits. An MVL allows you to extract remaining profits as a capital distribution taxed at 10% under Business Asset Disposal Relief (BADR), rather than as dividends at up to 39.35%. See our closing down a limited company guide for the full comparison of striking off, MVL and Business Asset Disposal Relief.
We handle everything — formation, bank, HMRC registrations, Xero, payroll and your first tax plan. Trading in under two weeks.
