How Much Does It Cost to Form a Limited Company

At Towerstone Accountants we provide specialist limited company accountancy services for directors and owner managed businesses across the UK. We created this webpage for people running a company who want clear answers on tax, payroll, Companies House duties, and day to day compliance without jargon. Our aim is to help you understand your responsibilities, reduce the risk of penalties, and know when to get professional support.

This is one of the first questions I am asked by anyone thinking about starting a business in the UK and it is a sensible one. Forming a limited company is often described as cheap or even free, but that description can be misleading. While the headline cost can be very low, the true cost depends on how you form the company, what support you need, and what you want the business to do from day one.

From my experience as a chartered accountant advising new and growing businesses, the biggest issue is not the cost of forming the company itself, but the assumptions people make about what is included and what comes next. In this article, I will break down exactly how much it costs to form a limited company in the UK, what those costs cover, what is optional, and where people often underestimate the total spend.

My aim is to give you a clear and realistic picture so you can budget properly and avoid surprises.

The basic cost of forming a limited company

At its simplest, forming a limited company in the UK is relatively inexpensive.

If you form a company directly with Companies House, the current cost is:

• £12 if you file online

• £40 if you file by post

This fee covers the official registration of the company and the creation of a unique company number. For most people, the online route is quicker and more practical.

This is the minimum cost required to legally create a limited company in the UK.

What you get for the Companies House fee

The Companies House registration fee covers the legal creation of the company. Specifically, it includes:

• Registration of the company name

• Issue of the certificate of incorporation

• Creation of the company record

• Public registration of directors and shareholders

It does not include any advice, planning, or ongoing support. This distinction is important.

Forming a company online yourself

Many people choose to form their company online themselves using the Companies House website.

This approach is often suitable if:

• The structure is simple

• There is one director and shareholder

• You are comfortable completing forms

• You understand basic company responsibilities

The process itself is relatively straightforward and can often be completed in under an hour.

However, this route assumes you already understand:

• What share structure to use

• How to complete the articles of association

• What information must be disclosed publicly

• Your ongoing legal duties

Mistakes made at this stage can be time consuming to fix later.

Using a company formation agent

Another common option is using a company formation agent.

These services typically charge between:

• £15 and £50 for basic formation

• £50 to £150 for more comprehensive packages

The cost varies depending on what is included.

Most formation agents handle:

• Company registration

• Standard articles of association

• Share allocation

• Electronic documents

Some packages also include extras such as a registered office address or business stationery.

What formation agents do and do not do

Formation agents focus on administration rather than advice.

They usually do:

• Submit forms to Companies House

• Ensure the company is legally formed

• Provide standard documents

They usually do not:

• Advise on tax planning

• Assess whether a limited company is right for you

• Help with PAYE or VAT

• Provide tailored articles or shareholder agreements

This is an important distinction. Formation agents are not a replacement for professional advice.

Using an accountant to form a limited company

Many people choose to form their limited company through an accountant.

The cost for this typically ranges from:

• £50 to £300

• Sometimes included free as part of a wider package

The higher cost reflects the fact that you are paying for advice as well as registration.

When an accountant forms a company, they often:

• Advise on whether a limited company is suitable

• Help choose the right share structure

• Consider future tax planning

• Ensure the setup aligns with your goals

In my experience, this approach often saves money long term, even if the upfront cost is higher.

Share capital and whether it costs money

One common misunderstanding is around share capital.

When forming a company, you must issue at least one share. This does not usually involve paying money to anyone.

For example:

• Issuing one £1 share means the shareholder owes the company £1

• That £1 does not have to be paid immediately

Share capital is a legal concept, not a fee.

Registered office address costs

Every limited company must have a registered office address.

Options include:

• Using your home address

• Using your accountant’s address

• Using a virtual office service

Using your own address is free but means it is publicly visible.

Virtual office or registered address services typically cost:

• £30 to £150 per year

These services can provide privacy and professionalism, but they are optional.

Director service address costs

Directors can also use a service address instead of their home address.

This is optional but increasingly popular.

Costs are similar to registered office services and often bundled together.

Articles of association and bespoke documents

Standard articles of association are usually sufficient for simple companies and come free with Companies House or formation agents.

However, bespoke documents may be required where:

• There are multiple shareholders

• Investment is involved

• Profit sharing is complex

• Future exit planning matters

Custom articles or shareholder agreements often cost:

• £300 to £1,500 or more

These are not formation costs in the narrow sense, but they are often closely linked.

Costs after the company is formed

One of the biggest mistakes I see is focusing only on the cost of formation and ignoring what comes next.

Once a company is formed, there are immediate and ongoing obligations.

These may include:

• Accounting fees

• Corporation Tax compliance

• PAYE registration

• VAT registration if required

• Confirmation statements

These are not formation costs, but they are unavoidable if the company trades.

Accounting and compliance costs

For a typical small limited company, annual accountancy costs might range from:

• £600 to £2,000 or more

This depends on:

• Turnover

• Complexity

• Number of transactions

• Level of support needed

These costs far outweigh the cost of forming the company itself and should be budgeted for from the outset.

Bank account setup

Opening a business bank account is usually free, but some banks charge monthly fees.

Typical costs include:

• Free introductory periods

• £5 to £15 per month thereafter

While not a formation cost, a bank account is essential for trading.

VAT and PAYE setup costs

Registering for VAT or PAYE does not usually involve a fee, but there may be professional costs if you need help setting it up correctly.

Incorrect setup can cause problems later, so this is an area where advice often pays for itself.

Hidden costs people often overlook

In my experience, the most overlooked costs include:

• Time spent correcting setup mistakes

• Fees for changing share structures later

• Costs of fixing Companies House errors

• Tax inefficiencies caused by poor planning

These costs are rarely obvious at the start but can add up quickly.

Is forming a limited company cheap or expensive

Technically, forming a limited company is cheap.

In reality, forming a limited company properly is about more than paying a registration fee.

The real cost depends on:

• How much advice you need

• How complex your plans are

• Whether mistakes are avoided early

A £12 company can become expensive if it is structured badly. A £200 setup with advice can be very cost effective long term.

When paying more upfront makes sense

Paying more upfront often makes sense when:

• You expect the business to grow

• There will be multiple shareholders

• Tax efficiency matters

• You want to avoid restructuring later

In these cases, the cost of proper setup is an investment rather than an expense.

When a low cost setup may be fine

A low cost setup may be suitable when:

• The business is small and simple

• There is one director and shareholder

• Risk is low

• You are comfortable learning as you go

Even then, ongoing advice is usually still needed.

Final thoughts

So, how much does it cost to form a limited company in the UK. At the most basic level, as little as £12. In practice, the cost is usually higher once you factor in advice, support, and proper setup.

From my experience, the key question is not how cheap you can form a company, but how well it is formed. The structure you choose at the beginning affects tax, risk, flexibility, and cost for years to come.

If you treat company formation as a box ticking exercise, it can be cheap but limiting. If you treat it as the foundation of your business, the cost is still modest, but the value is far greater.

You may also find our guidance on how long does it take to set up a limited company and how to set up a limited company helpful when exploring related limited company questions. For a broader overview of running and managing a company, you can visit our limited company hub.