Cost of Running a Company

Starting and running a company can be rewarding, but it also involves a range of costs that must be managed carefully. Whether you are setting up a new limited company or running an established business, understanding the ongoing expenses will help you stay financially stable and avoid unexpected surprises.

The cost of running a company depends on several factors, including the size of the business, the industry you operate in and whether you employ staff. This guide outlines the key expenses most UK businesses face so you can budget effectively and plan for growth.

Company formation and registration fees

The first cost is usually company formation. If you register a private limited company directly with Companies House, the standard online fee is currently £50. You may also choose to use a formation agent, which typically costs between £30 and £150 depending on the package and services included.

These fees are one-off costs, but they are just the beginning. Once the company is formed, you will need to think about regular operational expenses.

Accounting and bookkeeping

All UK limited companies must prepare annual accounts, file a confirmation statement and submit a Corporation Tax return. Most business owners use an accountant to help with these responsibilities. Basic annual compliance services usually cost between £500 and £1,500 per year, depending on the complexity of the accounts and whether VAT or payroll services are included.

If you handle your own bookkeeping, you may need cloud accounting software such as Xero, QuickBooks or FreeAgent. Subscriptions generally range from £10 to £30 per month. Using software makes it easier to manage income and expenses, generate invoices and submit returns on time.

Tax obligations

Corporation Tax is charged on your company’s profits at a rate of up to 25 percent, depending on your earnings. If your company is VAT registered, you must also collect and pay VAT to HMRC. This is a cost to manage rather than a business expense, but it can affect cash flow if not handled properly.

Employers must also pay National Insurance contributions for staff, and if you pay yourself a salary through PAYE, you will have income tax and National Insurance to account for personally as well.

Insurance

Business insurance is not always a legal requirement, but it is strongly recommended. Employers’ liability insurance is mandatory if you have employees. Public liability and professional indemnity insurance are common in many industries.

Premiums can vary widely based on your sector and level of cover. For example, a small consultancy firm might pay £150 to £300 per year, while a construction company may pay several thousand pounds.

Premises and utilities

If you rent office space, this will be one of your biggest overheads. Costs depend on location and size, with prices ranging from a few hundred pounds per month for a small office to several thousand in prime city locations.

You will also need to budget for utilities such as electricity, gas, water, internet and phone lines. Even if you run your company from home, you may incur additional costs for energy and equipment.

Staff wages and employment costs

If your company employs people, salaries will be a major part of your operating costs. In addition to wages, you must also consider pension contributions, holiday pay, sick pay and National Insurance.

Recruitment and training add to this cost. Even if you outsource certain functions to freelancers or contractors, there will still be regular payments to manage.

Marketing and advertising

Getting your business noticed requires a budget for marketing. This can include website hosting, paid ads, branding, social media promotion and printed materials. Some businesses spend as little as £100 per month, while others invest thousands, depending on their growth goals.

A professional website might cost £500 to £3,000 to develop, with ongoing costs for domain renewal, hosting and content updates.

Licences, software and subscriptions

Depending on your industry, you may need licences or permits to operate. These can be one-off or annual costs. You may also need business software, such as tools for project management, customer relationship management or design work. Many of these operate on a monthly subscription basis and can add up over time.

Bank charges and professional fees

Most business bank accounts charge a monthly or transaction-based fee. This is usually between £5 and £10 per month, although some banks offer free banking for the first year.

You may also need to pay for legal advice, consultancy or HR support from time to time. These professional services are worth budgeting for, even if only used occasionally.

Ongoing compliance

As a limited company, you must file an annual confirmation statement with Companies House, which currently costs £34. You must also keep your statutory registers up to date and maintain proper records. While these are not expensive tasks, they require time or professional help to manage correctly.

Final thoughts

Running a company comes with regular financial commitments that go beyond start-up costs. From accounting and tax to insurance, payroll and marketing, it is essential to understand your full cost base to remain profitable and sustainable.

By keeping accurate records, reviewing costs regularly and planning ahead, you can avoid cash flow problems and ensure that your company remains in a strong position to grow. Speak to an accountant or business adviser if you are unsure how to manage your company’s finances or want to optimise your expenses.