Short answer: to take money legally in the UK you need to tell HMRC you are trading and keep records of what comes in and goes out. Almost everything else on a typical start-up checklist can wait. Register for Self Assessment by 5 October following the tax year you started, get the right insurance if you go into people’s homes or handle their things, open a separate account for the money, and then go and find a customer.
The list of things you are told you need is long because most of it is sold to you by somebody who benefits. What you actually need before your first paying customer is short, and getting through it quickly matters more than getting through it perfectly.
This is general guidance rather than legal or accountancy advice, and rules change. Check the current position on GOV.UK, and speak to an accountant about your own situation.
What do you legally need before you can take money?
Three things, and only the first is universal.
1. Tell HMRC you are trading. If you are self-employed and your gross trading income goes over £1,000 in a tax year, you need to register for Self Assessment. Below that, the trading allowance normally means you do not have to register just to report it. The deadline catches people out: you must register by 5 October following the end of the tax year you started trading in, so somebody who started in the 2025/26 tax year had until 5 October 2026. It is not “within three months of starting”, which is the version people half-remember.
2. Keep records from day one. Every sale, every expense, receipts kept. This is not optional and it is dramatically easier to do as you go than to reconstruct in January from a carrier bag. A spreadsheet is genuinely fine at the start.
3. Anything specific to your trade. Some work needs a licence, registration or certification before you can legally do it, and it varies enormously: food, childcare, taxi and private hire, waste carrying, gas work, security. This is the one to check properly rather than assume, because trading without it is not a paperwork problem.
That is the legal minimum for a sole trader. Everything below is genuinely useful but not a barrier to starting.
Sole trader or limited company?
The question people spend weeks on, and for most new small businesses the answer is: start as a sole trader unless you have a specific reason not to.
Sole trader is faster to set up, cheaper to run, and much simpler at the end of the year. The trade-off is that there is no legal separation between you and the business, so business debts are your debts.
A limited company gives you that separation, can be more tax-efficient at higher profits, and looks more substantial to certain kinds of customer. The costs are real: annual accounts, a confirmation statement, director responsibilities, and usually an accountant.
The honest position is that this decision is reversible. Plenty of businesses start as sole traders and incorporate later once profits justify it, and that transition is routine. The specific reasons to incorporate from day one are usually liability exposure, a customer who will only deal with limited companies, or profits high enough that the tax position clearly favours it. If none of those apply, do not let the question stall you for a month. Ask an accountant once you have revenue and the answer becomes obvious.
If you do form a company, the name has to clear the Companies House rules, which is worth doing before you print anything: how to name your business.
What should you sort out in the first month?
Not legally required, but each of these prevents a specific and predictable problem.
A separate bank account. Not necessarily a business account. A second personal account is better than nothing if you are a sole trader and the bank permits it. Mixing business and personal money is the single most common reason a set of accounts takes three times longer than it should.
Insurance, if it applies to you. Public liability if you work in people’s homes or the public comes to you. Professional indemnity if you give advice. Employers’ liability is a legal requirement the moment you have staff. Tools and stock cover if losing them would stop you trading. If you are unsure, describe your actual work to a broker rather than guessing from a list.
A way to be found. A Google Business Profile costs nothing and is where a lot of local discovery starts. A phone number you answer. One place online that explains what you do. That is enough for month one.
Money set aside for tax. A proportion of everything that comes in, moved somewhere separate as it arrives. The specific number depends on your circumstances, which is what an accountant is for, but doing nothing is how a first tax bill becomes a crisis.
A way to invoice and get paid. Free tools do this perfectly well. Getting paid on time is mostly about invoicing promptly and stating terms clearly, not about software.
What can wait?
More than you think, and this is where new owners spend money they need.
- A logo. It is a decoration on a business you do not have yet, and the brief for it does not exist until you know who you serve. The full argument is here.
- A full website. A profile people can find beats a website nobody visits. Build the site when you know what it needs to say.
- Branded vehicles, uniforms and signage. Expensive to change, and the thing they say about you will change in your first year.
- An office or premises, unless the work genuinely requires it.
- Business cards in quantity. Order a small run or none.
- Accounting software, until you have enough transactions for a spreadsheet to hurt.
- A trade mark, unless you have something distinctive worth protecting now. Worth knowing it exists and is separate from a company name.
None of these are wrong purchases. They are just wrong now, and each one is money not spent on finding customers.
What is the actual first month, in order?
- Work out who it is for. Everything downstream is guesswork otherwise: how to define your target market.
- Work out what you charge and why: how to price your services.
- Sort the legal minimum above. An afternoon, not a fortnight.
- Separate account, insurance if relevant, a way to invoice.
- Set up the free places people will look for you, starting with a Google Business Profile.
- Tell people you exist, repeatedly, for longer than feels reasonable.
- Get a first customer, then a second, then improve everything based on what those two teach you.
Steps 1, 2 and 6 are the ones that determine whether the business works. Steps 3 to 5 are the ones people spend all their energy on, because they feel productive and have a finish line. Notice which is which.
What do people most often get wrong?
Spending the start-up budget on looking established. The van livery, the logo, the printed brochures. It feels like building a business and it is decoration on one that does not exist yet.
Waiting to feel ready. There is no threshold. The paperwork above takes an afternoon, and the rest is learned by trading.
Treating admin as the work. Admin has clear tasks with clear completions, which makes it comfortable. Finding customers is uncomfortable and has no finish line, which is exactly why it gets postponed.
Not putting tax aside. Predictable, avoidable, and genuinely dangerous.
Going quiet after launch. The announcement gets made, everybody is enthusiastic for a fortnight, and then nothing. Consistency after the excitement fades is the thing that separates businesses that build a following from businesses that had a good launch: how to post consistently when you run the whole business.
Frequently asked questions
Do I need to register a business to start trading in the UK? As a sole trader you need to register for Self Assessment with HMRC once your gross trading income passes £1,000 in a tax year, by 5 October following the end of that tax year. You do not have to form a limited company to trade. Some trades additionally require a licence or registration before you can legally operate, so check what applies to yours on GOV.UK.
What is the trading allowance? An allowance meaning that if your gross trading income for a tax year is £1,000 or less, you normally get full relief and do not need to register for Self Assessment just to report it. It is useful for testing an idea before committing. Check the current rules on GOV.UK, since allowances change.
Should I start as a sole trader or a limited company? For most new small businesses, sole trader, unless you have meaningful liability exposure, customers who require a limited company, or profits high enough that the tax position clearly favours incorporating. It is a reversible decision and incorporating later is routine, so do not let it delay you.
Do I need a business bank account? A limited company legally needs its own account because the company’s money is not yours. A sole trader does not, though keeping business money separate makes bookkeeping far easier and is worth doing from the first payment.
What insurance does a small business need? It depends entirely on the work. Public liability if you enter customers’ premises or they enter yours, professional indemnity if you advise, employers’ liability by law once you have staff, and cover for tools or stock if losing them would stop you trading. Describe your actual work to a broker rather than choosing from a generic list.
How much does it cost to start a small business in the UK? Less than most lists suggest. Registering as a sole trader costs nothing. Forming a limited company costs a modest fee. The genuinely unavoidable costs are usually insurance and whatever tools or stock the work itself needs. Most of what inflates a start-up budget is optional and better bought later.
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