How much does it cost to start a business in the UK?

Introduction

Startup costs for a UK business can range anywhere from £0 to £50,000+, depending on your business type and legal structure. Sole traders and online service businesses often start with under £1,000, while limited companies or product businesses typically require more – from £50 to £1,500. Expenses include business registration, equipment, insurance, marketing, and software.

This guide breaks down typical startup and first-year expenses, compares costs by business type, and explains what to prioritise – so you can launch your business with clarity and confidence.

Startup costs in the UK: What new businesses typically spend

The cost of starting a business in the UK varies widely – from as little as £0 to £50,000 or more, depending on your industry, legal structure, and how you choose to operate. Sole traders and digital service businesses can often launch with less than £1,000. Private limited companies and business ventures requiring physical premises, inventory, or employees will typically face much higher initial costs.

To plan effectively, it's useful to break startup costs into three categories:

• Company formation – legal setup and company registration
• Business launch – tools, marketing, equipment, and early operations to begin trading and attract customers
• Survival costs – ongoing expenses until revenue becomes consistent

New founders often focus on launch costs and overlook survival costs, which is where cash-flow issues typically emerge. The problem is rarely the business idea, but the fact the business runs out of money before achieving sustainable income and building momentum.

As a baseline, many UK startups budget £1,000 to £5,000 to launch a lean business. But once you include first-year operating costs like software, insurance, marketing, and accounting support, total costs tend to be higher. A clear, realistic 12-month budget helps manage spending while you test, learn, and grow.

Startup cost comparison by business type

To help you quickly gauge where your idea sits cost-wise, here are typical UK startup cost ranges by business model. These are intentionally broad because the same business type can be lean or expensive depending on your choices, for example, DIY vs outsourcing, home vs premises, organic vs. paid marketing.

This comparison provides a realistic UK breakdown by business model. If you think you can open a retail shop for £1,000, for example, this comparison should prompt useful questions, such as: Can I afford the rent deposit, fit-out, stock, or insurance?

Sole trader vs limited company: What changes the cost?

A major factor in your startup budget is your legal structure. In most cases, first-time founders choose between starting as a sole trader or forming a limited company.

Starting as a sole trader: Typical costs

Becoming a sole trader is often the fastest and lowest-cost route, as there’s no incorporation step required at Companies House. In practice, many sole traders spend little up front because they can begin trading quickly.

Common sole trader costs include:

• Basic admin setup – email, invoicing tools, or spreadsheets
• Insurance – purchasing insurance policies appropriate to your work
• Equipment – often already owned, such as a laptop
• Simple marketing – basic website, profile pages, etc.

Registration itself is free, but you still need to register for Self Assessment with HMRC and maintain proper records. For many founders, the real cost is setting up a simple bookkeeping and accounting process, so taxes don’t become stressful later.

Typical startup cost for a lean sole trader: £0–£500
Typical monthly running cost: £50–£300 (depending on tools and marketing)

Forming a limited company: Typical costs

Forming a limited company in the UK typically involves more administrative tasks than operating as a sole trader, which can result in slightly higher setup and ongoing costs.

At a minimum, a limited company must be registered with Companies House and maintained in accordance with UK compliance rules. Most founders also choose to use accounting software and maintain separate business banking and records.

If you plan to pay yourself through Pay As You Earn (PAYE) or take on staff, you may also require payroll software or professional support.

Typical limited company costs include:

• The incorporation fee and initial registration
• An annual confirmation statement
• Accounting or bookkeeping software (and optional professional support)

While these requirements can sound daunting, the costs are often manageable and predictable when planned properly. For example, company formation packages from 1st Formations start at £52.99, which includes the Companies House filing fee. Optional packages are also available, covering ongoing compliance support and address services. This can help new directors avoid common administrative mistakes.

Founders often choose the limited company route because it offers limited liability, greater credibility with customers and lenders, and a structure that can support future growth. However, it’s important to understand that forming a limited company involves an ongoing commitment to meeting annual statutory obligations.

Typical startup cost for a lean limited company: £50–£1,500
Typical monthly running cost: £80–£400+ (depending on software, support, and payroll needs)

Types of startup costs

One reason startup budgeting feels confusing is that different costs behave differently. A smart budget categorises expenses so you can plan effectively, for example, evaluating one-off vs. ongoing costs, and essential vs. optional costs.

• One-off costs – things you pay once, such as a laptop, initial branding, incorporation
• Ongoing fixed costs – monthly or annual costs that remain fairly stable, for example, subscriptions, insurance, rent
• Variable costs – costs that rise as you sell more, for example, packaging, card fees, and materials.
• Essential costs – costs that are required to trade safely and legally
• Optional costs – costs that can improve speed or quality, but can often wait

When you separate costs in this way, you can make more informed decisions. For example, an optional one-off cost may be worth it if it saves you months of effort, but an optional ongoing cost can quietly drain cash flow if you sign up too early.

Essential startup costs

Below are the most common startup costs across UK business types, with guidance on why they matter and where founders tend to overspend.

1. Insurance (often essential, sometimes legally required)

Insurance is one of the most underestimated startup expenses because many founders treat it as something to sort out later. The right insurance can be the thing that keeps a small setback from becoming a major financial problem.

Costs vary widely, but typical ranges are:

• Public liability insurance – often £60–£300/year for small service businesses
• Professional indemnity insurance – often £100–£500/year depending on risk and sector
• Employers’ liability insurance – legally required if you have employees, even for part-time staff or volunteers in some cases

If you’re a consultant or someone providing professional advice or delivering customer services, professional indemnity insurance is worth considering.

2. Software and subscriptions (small monthly costs add up)

Most businesses use software even if they don’t think of it that way: email, calendar, invoicing, bookkeeping, cloud storage, project management, design tools, scheduling, customer databases, and so on.

It’s very easy to end up paying for too many business tools too soon. A sensible approach is to start with the minimum set that keeps you organised and compliant, then upgrade only to remove friction that’s slowing you down.

Typical costs:

• Lean setup: £20–£60/month
• Growing business: £80–£150+/month

3. Website, domain, and email

Not every startup needs an expensive website, but most benefit from having at least a simple online presence that confirms legitimacy and helps customers find you.

A good early-stage approach is:

• Buy a domain
• Set up a professional email address
• Build a simple site (or even a one-page landing page) with a clear offer, pricing, and contact info

Typical costs:

• Domain: £10–£20/year
• Email: £5–£15/month
• Website builder/hosting: £10–£40/month
• Custom design: £500–£5,000+ (optional)

To begin with, use low-cost builders like Wix, Squarespace, or WordPress to create a landing page with your offer and contact info.

4. Equipment and tools

Equipment costs depend heavily on your business model. A freelance copywriter may need nothing beyond a laptop they already own. A photographer, tradesperson, or caterer can require specialist equipment to trade safely and professionally.

A practical budgeting method here is to separate:

• Must-have equipment to deliver your service/product
• Nice-to-have upgrades that improve speed or appearance later
• This keeps your launch budget lean without compromising quality.

5. Marketing

Marketing can be cheap or expensive, and the results don’t always correlate with spend. This is also the cost category that founders misjudge the most.

Some founders overspend early by paying for branding packages, big ad campaigns, or expensive agencies before they’ve fully developed their offer. Others underspend by assuming customers will just find them.

A balanced approach is:

• Put time into organic marketing first, for example, networking, local partnerships, social media, content, referrals
• Use a small paid budget to test what converts
• Scale paid marketing only when you can measure returns

Typical costs:

• Lean start: £0–£200/month
• More competitive markets: £300–£1,500+/month

Optional costs worth considering

Optional costs aren’t bad. However, they’re not always urgent. Examples include:

• Outsourced bookkeeping or an accountant from day one
• Professional brand identity and guidelines
• High-end website builds
• Paid tools that save time (automation, CRM, analytics)

These can be excellent investments once you’ve validated demand.

Unexpected startup costs UK founders face

Even lean startups run into unplanned costs. Common examples include:

• Replacing broken equipment
• Software price increases or upgrades
• Returns/refunds and customer service costs
• Compliance support once revenue grows
• Late-paying customers

A simple rule that helps is to add a 10–20% contingency buffer to your estimated costs, especially for the first year.

First-year cost ranges

A major weakness in many competitor guides is that they talk about startup costs as if everything happens at launch. Founders usually feel the pressure in months 2 to 6, when costs continue, but revenue is weak or inconsistent.

Here’s a simple example of a lean service business:

And a lean ecommerce example might add:

• Packaging and postage
• Platform fees
• Stock re-orders
• Returns and customer service overhead

Can I start a business with £1,000?

Yes. In many cases, £1,000 is enough to start a business in the UK, particularly if you:

• Sell services rather than products
• Work from home
• Keep software minimal
• Focus on organic marketing first

Here’s how a realistic £1,000 setup might break down:

• £150 insurance (annual or deposit)
• £100 domain/email/website basics
• £250 essential equipment upgrades
• £300 marketing tests (small paid campaigns, local promos, signage)
• £200 contingency buffer

Starting a business in the UK with low capital is entirely possible. However, £1,000 usually cannot cover high deposit commitments for property, major fit-outs, large stock purchases, or early staffing.

What startup expenses should I prioritise first?

A useful prioritisation framework is:

• Critical costs for launch
• Legal company structure and compliance basics
• Insurance
• Minimum equipment to deliver quality
• A simple way to get paid and track finances
• Growth-stage investments
• Paid marketing once you know your best channels
• Professional branding
• Better systems (CRM, automation)
• Things to delay or DIY
• Bespoke website design
• Large advertising budget
• Long-term office leases

This approach keeps your startup lean while still building credibility.

Startup budget checklist

1. Decide your business type and whether you’ll be a sole trader or a limited company
2. List your one-off launch costs
3. List your monthly ongoing costs
4. Add variable costs that increase with sales
5. Add a 10–20% contingency buffer
6. Map out 12 months of cash flow pressure points

Starting your business with a clear budget sets the tone for healthier finances and better decision-making. It also helps you start in a way that is sustainable and far more likely to succeed. If you’re ready to register your company, explore our affordable startup packages for UK limited companies.