How to start a business in the UK: your first year
A practical guide to starting a business in the UK: the steps in order, what a business plan needs, and the tax, accounting and admin tasks for your first 12 months.
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First year in business checklist
Everything to do in your first 12 months: tax registrations, accounts setup, insurance, and the deadlines you must meet.
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How do I start a business in the UK?
Most people start as a sole trader or a limited company. A sole trader can start trading straight away without registering the business, but must register for Self Assessment if they earn more than £1,000 in a tax year (6 April to 5 April). A limited company must be registered at Companies House before it starts trading.
A sensible order is: test the idea and write a plan; choose the structure; register (Self Assessment for a sole trader, Companies House for a company); set up bookkeeping and keep records from day one; then check the tax registrations that depend on the business, such as VAT and PAYE. You must register for VAT if taxable turnover goes over £90,000 in the last 12 months, or you expect it to in the next 30 days. You can register earlier if you choose.
Check whether your trade needs licences, permits or business insurance before you take the first order. Choosing the structure first matters, because it decides which registrations you need at all.
Official guidance: GOV.UK: Set up a business; GOV.UK: Set up as a sole trader; GOV.UK: Set up a private limited company; GOV.UK: Register for VAT
What goes in a business plan?
A business plan is a written document that describes your business: its objectives, strategies, sales, marketing and financial forecasts. GOV.UK says you can use it to clarify your idea, spot problems, set goals and measure progress, and that you will need one to secure investment or a loan from a bank. It can also help convince customers, suppliers and potential employees.
A workable outline is: a one-page summary; what you sell and who buys it; who else sells to them; how you will find customers; how the work gets done and by whom; start-up costs and how you will fund them; a 12-month cash flow forecast; a profit forecast; and a tax and registration plan. A plan for your own use can be short. A lender or investor will expect more detail and evidence.
Remember tax in the forecast. A sales figure is not what is left to spend. Build in Income Tax and National Insurance (or Corporation Tax and what you draw from the company), the first Self Assessment bill and any VAT, so the cash flow shows what you will really have.
Official guidance: GOV.UK: Write a business plan
Where can I find a business plan template or example?
GOV.UK points to free templates: a business plan template from The King's Trust, and a business plan template and a cash flow forecast template from Start Up Loans. Start Up Donut publishes a detailed guide to writing one. Use a template as the shell and put your own figures in, because an example with someone else's numbers will not tell you whether your business works.
Keep the plan alive. Compare real results with the forecast each quarter and update it. If you want a second pair of eyes on the numbers and the tax in your forecast, that is the work an accountant does well.
Official guidance: GOV.UK: Write a business plan; GOV.UK: Apply for a Start Up Loan
The first-year calendar, assembled
A sole trader's first year runs to 5 April, with registration due by the following 5 October and the first return and payment the January after. A company's first year runs to its accounting reference date, with accounts due 21 months after incorporation, Corporation Tax nine months and a day after the period end, and the CT600 at twelve months.
Write your own version of this down in month one. Your dates, in order, with amounts estimated. Every first-year crisis we see is one of these dates arriving unannounced.
The habits that decide the year
Reconcile the bank monthly from month one. Ring-fence tax from every receipt. Invoice promptly and chase on a schedule. Keep business and personal money separate. File everything the calendar demands, on time, even when the numbers are small.
None of this is sophisticated; all of it compounds either way. A year of small good habits arrives at year end as a filing exercise; a year of small bad ones arrives as archaeology with deadlines.
The first-year traps
The first Self Assessment bill arrives with payments on account stacked on top: eighteen months of tax in one January. The rolling VAT test creeps while you watch the accounting year. Cash in the account gets mistaken for profit, then spent, then owed. And 'I'll sort the bookkeeping later' becomes a year-end reconstruction bill that costs more than the software subscription ever would.
Each trap is disarmed the same way: know the number early. That is what monthly records are for.
When to bring in an accountant
Before the structure decision, ideally. It is the highest-leverage conversation of the year and takes thirty minutes. Failing that, before the first VAT decision, the first hire, or the first January. An accountant brought in at year end can file what happened; brought in early, they shape it.
That is the basis we work on: structure and registrations sequenced at the start, Compliance Vault™ running the records and deadlines from month one, and the first year's numbers known all year rather than discovered in January.
Frequently asked questions
How do I start a business in the UK?
Decide whether to trade as a sole trader or a limited company, write a plan, register (Self Assessment for a sole trader, Companies House for a company), keep records from day one, then check whether you need to register for VAT or payroll. A sole trader must register for Self Assessment if they earn more than £1,000 in a tax year.
Do I need a business plan to start a business?
There is no legal requirement to have one. GOV.UK says you will need one to secure investment or a bank loan. Even without a lender, a plan helps you test the idea, set goals and work out how much cash you need before the first tax bill arrives.
Where can I get a business plan template in the UK?
GOV.UK links to free templates from The King's Trust and Start Up Loans, including a cash flow forecast template. Fill them with your own figures and review them at least quarterly.
What should a business plan include?
Your objectives, what you sell, your market and customers, how you will sell and market, how the work is done, start-up costs and funding, and financial forecasts. Add tax to the forecast, or the cash flow will overstate what you can spend.
Do I have to register before I start trading?
A sole trader can start trading without registering the business, but must register for Self Assessment by 5 October after the end of the first tax year they earn more than £1,000. A limited company must be registered at Companies House before it starts trading.
How much should I set aside for tax in year one?
A common working rule is 25–30% of profits for a sole trader (remembering the first January includes payments on account) and for a company, the Corporation Tax accruing on profits plus the personal tax on what you draw. Ring-fence it monthly; precision can wait, the habit cannot.
Do I need an accountant in my first year?
You need the structure decision, the registrations, and the record-keeping habit right, however you get them. Most first-year returns are simple; most first-year mistakes are structural. One early conversation typically pays for itself several times over in avoided unwinding.
What software should I start with?
Any mainstream MTD-compatible cloud bookkeeping tool with bank feeds, started in month one and kept current. Which one matters far less than when you start using it. We set clients up on software matched to the business and take the bookkeeping into Compliance Vault™.
When does my first tax bill actually arrive?
Later than intuition says: a sole trade started in summer may owe nothing until the January eighteen months on, and a company pays nine months and a day after its first year end. The gap is the trap: the money feels spare precisely when it is being earned and owed.