How to Start a Business in the UK

Why Start an Online Business in the UK?

Starting a business used to have high barriers to entry, requiring entrepreneurs to have a physical base, physical stock, or a network already in place. However, the dawn of online businesses has democratised entrepreneurship, allowing business owners to reach a global audience with minimal upfront investment.

Service industries account for around 81% of UK total output. While not all of this is due to online businesses, a strong professional services sector and booming technology-focused industries like fintech have contributed to the UK’s success in services. 

The country also has good digital infrastructure and support for technology-based companies, which makes it a great location to start an online business.

Key Considerations Before Starting

Instead of skipping straight to the technical details associated with starting a business, every would-be entrepreneur should take a moment to pause and consider their motivations and approach.

Discover Your Motivation for Starting a Business

Everyone needs money. But if finances are your sole reason for starting a business, it may be challenging to motivate yourself when things get tough. To maximise the chances of persevering, you need a deeper purpose.

This could be needing money to fund a specific goal or starting a company out of a desire to solve a problem and help people.

Understand your Entrepreneurial Passions

What is it about entrepreneurship that attracts you? Is it the challenge and the fast-paced environment, the process of creating a new idea, or the skills involved in sales? Whatever the answer, try to orient your business to match your passions.

Are You the Right Age to Start a Business?

In the UK, the minimum legal age to start a limited company is 18. Those below this age can still be directors if they form the company with someone over 18.

There’s no minimum age to become a sole trader. However, those under 18 may still face other obstacles, such as the inability to open a business bank account. 

Idea generation

Idea Generation

Many entrepreneurs come up with the idea for their businesses out of their own desire to buy a good or service that isn’t currently available. Others notice a gap in the market after working in an industry.

You might not fall into either of these categories right now, but you can generate ideas in other ways.

How to Find Great Business Ideas

Some tips to find your next winning business idea include:

Don’t limit yourself to one business idea. Push yourself to come up with as many ideas as possible – no matter how crazy – and pick from the best.

Business Models for E-Commerce

An increasingly popular business idea for many is e-commerce.

E-commerce businesses can fall into two categories: Product-based and service-based companies. Let’s look at both of them in more detail.

Product-Based Business

Product-based e-commerce businesses sell physical items online.

These could be:

Or anything in between!

Service-Based Business

Service-based e-commerce stores sell a service that a person (or team) provides.

Some examples include:

Whatever e-commerce business you choose to open, you can register it with us and get a business account that integrates with Shopify, Woocommerce, Amazon and Ebay, so that all your sales are in one place.

Consider Franchising

Franchising means running a business using another brand. 

One of the most famous examples is McDonald's. Anyone can open a restaurant under the brand name by buying the rights from McDonald’s, paying royalties to them, and continuously following guidelines.

The same principle applies to other franchises, including Costa Coffee, Subway, and Domino’s.

Franchising can be a profitable endeavour since it allows business owners to capitalise on an existing brand that consumers already trust, minimising business risk.

market research

Market Research

Once you have an idea you’re happy with, it’s time to move on to the market research phase.

Conducting Market Research

You need to define and analyse your target market to determine whether there’s demand for your product or service. 

Start by creating “user personas” of your potential customers, which define exactly who your customers are, including:

Then, you can enlist market research tools to determine how many customers fit your user personas. 

For example, if you’re targeting millennials who use TikTok in the UK, you could estimate the total number of TikTok users who are British millennials. This would be your market size.

Market Research Tools

Some tools that may help your market research include:

Competitor Analysis

As well as analysing your consumers and market size, it’s also crucial to analyse your competitors – this will determine how your business will fit into the landscape. 

Identify your top competitors and note down key information, including:

You may also want to conduct a SWOT Analysis. This involves analysing a company’s strengths, weaknesses, opportunities, and threats. Once you have this info, it gives you a better idea of a competitor’s current position in the market and where there could be a gap for you.

test ideas

Test Your Business Idea

Before you get too involved in the details of your business, test your idea to see if it’s feasible. 

Testing Strategies

The simplest way to test your idea is to see whether people are willing to buy from you. But instead of investing a lot of time and money into creating your final product, use a minimum viable product (a basic, simplified version of what you offer).

For instance, instead of selling an entire clothing range, you could try to sell a simple t-shirt with the style you want.

Another strategy is to run a social media campaign and see how many people you can get to sign up for a mailing list or waiting list.

Or, you could also explore market stalls or telesales opportunities.

Measuring Performance

It’s essential to be precise when testing the strategies above. Make sure you’re using an accurate tool to collect data, and start using it from the get-go.

Also, to improve your chances of obtaining accurate results, don’t just rely on one testing method or strategy. Test out a campaign on multiple platforms, advertise your minimum variable products to different groups, or do a bit of both.

Writing a Business Plan

A business plan is a document that outlines how you plan to run your business, including concrete goals and how you plan to achieve them.

Essential Components

Some essential parts of a business plan include:

Writing Tips

Your business plan should be concise and relevant, with clear objectives and a timeline. It’s particularly important to keep the mission statement simple so any investors or stakeholders can understand your company.

Also, check for grammar and spelling errors. 

Are you launching an app? Check our blogpost about how to write a business plan for a mobile app.

Formatting and Presentation

Choose appropriate formats and present your plan effectively. It’s generally best to adopt a somewhat formal style, but make sure you use visuals too, which help the reader to engage with the information more easily.

Maintenance and Tools

You may need to refresh your business plan as your company changes. Your first attempt isn’t going to be your final result, so it doesn’t have to be perfect the first time around.

How many businesses are there in the UK?

For the past 10 years there are over 5 million businesses in the UK with an average of 800,000 new business register every year, so you are definitely not alone. This number changes based on many socio-economic factors, such as Brexit and Covid-19.

How many businesses are there in the UK?

Choosing a Business Structure

Now that your business is starting to take shape, you need to consider what form it’s going to take.

Types of Business Structures

The three main types of business structures in the UK are sole traders, partnerships, and limited companies.

Sole Trader

A sole trader is the simplest type of business structure. There are minimal filing requirements, and sole traders don’t need to separate their business and personal lives. This makes it an appealing option for many, but the downside is that a sole trader has full liability for any company's legal or financial issues.

Partnership

A partnership means two partners share business responsibilities. Limited liability partnerships offer limited liability to partners, meaning they’re not personally liable for any financial or legal concerns. However, a partnership has a simpler and more flexible structure than limited companies. 

Limited Company

As the name suggests, limited companies also offer limited liability. They’re the most complex business type, with more reporting requirements and a more sophisticated structure. However, they’re the best choice for companies that want to grow or obtain financing as they allow shareholders.

Sole Trader vs. Limited Company: Which is Cheaper?

There are fewer costs associated with operating as a sole trader. However, operating a limited company can mean paying less tax. Find out more about different types of business structures in our blog post about how to register a business in the UK. 

register a business

Business Registration

Once you’ve decided what kind of business to start, you can register it.

Registering Your Business Name

When registering a limited company, you’ll need to choose a name. It can’t be the same as another company's name – the rules are outlined here. 

Sole traders and partners may trade under their own name, which doesn’t have to be unique, or a “doing business as” name.

Registering Your Business Structure

Sole Trader Registration

To become a sole trader, you need to register for self-assessment online. 

Limited Company Registration

To start a limited company, you can register online with ANNA. Not only will it be cheaper for you, than registering directly with Companies House, because ANNA covers your registration fee, but you will also get an assistance with the process, and after successful registration you will get a ready to go business account with automated accounting software, so that you are compliant with the HMRC from day 1 of your business operations. 

Registering a Limited Liability Partnership

To start a limited liability partnership, you need to fill out an application, as outlined here.

Registering for Corporation Tax

Usually, companies register for corporation tax at the same time as they register their business. Otherwise, you can register separately through your HMRC business tax account online.

Trademarking Your Business Name

To trademark your business name, you must submit an application to the Intellectual Property Office (IPO) online or by post.

Protecting Your Intellectual Property (IP)

Additionally, you can protect your intellectual property by registering patents or obtaining copyright protection for creative work. This won’t be necessary for every business. 

UTR Number

You will receive your company's Unique Taxpayer Reference (UTR) number when you register your business.

Registering for VAT

You can register for VAT online. You’ll need the Government Gateway ID and password for your company, along with details of your business. Find out more about VAT registration threshold.

Applying for Licences and Permits

In some cases, you may need to acquire licences and permits for your business. For instance, if you plan to sell alcohol, you will need a licence from your local council.

business funding

Funding Your Business

Most businesses require some upfront investment to get started. Below are some of the best ways to obtain the necessary capital.

Taking Out a Business Loan

Many banks offer business loans to help companies cover costs. You’ll usually need to provide financial statements and other documents to secure a loan.

Getting a Start-Up Loan

The UK government also offers Start Up loans of £500 to £25,000. As well as financing, borrowers receive help writing a business plan and free mentoring. 

Applying for Small Business Grants

In some cases, you may be eligible for a grant. Some grants to check out include The Prince’s Trust Enterprise Programme and Innovate UK Business Growth.

Many grants are specific to certain regions and industries. 

Self-Funding

If you’re lucky, you may be able to fund your own business through savings or loans from family and friends.

Different Funding Options

Most people can’t afford to fund their own business. However, there are options available.

In addition to loans, business credit cards offer a flexible way to gain financing quickly. Unlike other loans and grants, you don’t have to state a specific reason for the funds or a specific amount you want – you can just borrow on an ad-hoc basis.

Similarly, if you can open a business bank account that offers an overdraft, this can be a convenient option to obtain financing.

However, both of the above can lead to paying excessive interest, so be careful.

Finding Investors

If you think your business has the potential to achieve rapid growth with some injection of capital, it may be time to find investors. 

Angel Investors

Angel investors invest in small businesses and receive a stake in return – think Dragon’s Den.

They use their business and industry expertise to decide which companies are worth investing in. As they’re accomplished business people themselves, they may help them in non-financial ways too, such as offering advice.

Venture Capital

Venture capitalists also provide funding to new businesses in return for a stake. However, angel investors operate individually, while venture capitalists are professionals who work for other firms

Crowdfunding

Businesses no longer need to wait for gatekeepers like angel investors and venture capitalists to see their potential to be successful. Crowdfunding gives them the chance to make their case to the public online for why their company needs funding. 

If enough people out there believe in what they’re doing, they have the chance to raise the finance needed to get an idea off the ground.

The biggest crowdfunding sites in the UK include Seedrs, Kickstarter, and Crowdcube.

Accounting and tax

Setting Up Finances, Accounting and Tax

Financial management isn’t the most exciting part of setting up a business, but it’s one of the most crucial. 

Opening a Business Bank Account

Most major high street banks in the UK offer business bank accounts, however, the process can take a while and involve visits to physical branches and bureaucracy. It is much faster and easier to open a business account online, at ANNA we open most of the business accounts in under 10 minutes and provide 24/7 customer support with average response time in under 50 seconds (you can check live status here). ANNA is much better than an old school business account, since it can also calculate and file your taxes, chase unpaid invoices, and generate payment collection QR code so that you can take payments from your customers on the go. 

Understanding Your Accounting, Tax, and Filing Responsibilities

As a business owner, it’s your responsibility to ensure you’re complying with your legal obligations.

It is important to record your financial transactions and maintain accurate records so you can file your taxes smoothly and have everything ready in the case of an audit. 

You’ll need to gather the following:

Companies must file a confirmation statement at least once a year, which confirms to HMRC that the information provided is up to date. 

It’s also your responsibility to tell Companies House, HMRC, and relevant regulatory bodies about any changes. 

You may also be subject to business rates if you own a physical premises, such as an office or shop. This is a tax on the occupation of a non-domestic property, and you’ll receive the bill from your local council in February or March.

Managing your accounting can be complex. Failing to calculate your taxes correctly and filling them to HMRC on time can result in high penalties or even jail. ANNA +Taxes can help you to stay compliant with HMRC from day one of your business operations for a fraction of the price of an accountant. All your transactions will be recorded and categorised accordingly automatically, we will remind you about the deadlines and make sure you are staying on the top of your finances.

brand and marketing

Branding and Marketing

No matter how good the product or service you provide is, there’s only so far a business can go without solid branding and marketing efforts. Let’s delve into what it takes.

Branding Your Business

First, let’s take a look at the process of creating a brand.

Create a Professional Brand for Your Business

Building a brand is all about encapsulating why your business is operating and appealing to your audience. The market research you’ve carried out in the steps outlined above will be crucial for this. 

Some elements to consider include:

Make sure your business name is unique

Use a business name checker tool to make sure your desired business name is not taken yet. We have such tool of our own, and it may even suggest you some options if your initial idea is already taken. Give it a try:

You Need to Create a Website for Your Business

Once you’ve built your brand, you need a way to share it with the world. Your website is like your brand's digital shopfront.

Now that you’ve built your brand, you can implement the visual identity and messaging on your site.

Some businesses opt for a professional marketing agency or web developer to build their website, but you can also use sites like Squarespace and Wix for a similar effect.

You’ll also need to purchase a domain and choose a hosting provider. If you use one of the sites above or outsource the work, they may give you the option to purchase everything at once.

Create an Email Address for Your Business

No website is complete without an email address. This provides a way for customers to contact you.

When you first create your website, you often have the option to create an email address with a matching domain.

Marketing Your Business

The work isn’t over when you finish your website! Below are some tips for how you can keep marketing your business.

Developing an Online Presence

Your website is just the start of your online presence. Social media is becoming an increasingly important part of the puzzle for brands – it’s where most of your customers are hanging out, so why wouldn’t you want to join them?

Based on your research, figure out the social media of voice for your audience and prioritise creating a presence there.

In addition to this, it’s also a good idea to keep the blog on your website updated.

Creating a Marketing Plan

A marketing plan outlines how you intend to approach marketing, your strategy, and your campaigns. There’s some overlap with a business plan and the market research phase.

A typical business plan contains the following:

Investing in Organic Marketing

Organic marketing involves getting traffic and attention to your brand through genuine, unpaid interest rather than paid means (such as running ad campaigns).

While this can be tougher than paying for advertising, it generally pays off in the long run as it means your brand is attracting genuine interest.
Some examples include:

Exploring Marketing Channels

In addition to social media and your website, you may want to consider marketing channels such as:

Building a Content Strategy

When you first start posting content online, it can be tempting to post any ideas you come up with. But as with everything in business, it’s better to be strategic.

Based on your marketing plan, you’ll know your key goals and the customers you’re trying to reach. Use that to inform your content strategy by choosing themes to help you achieve your goals.

For instance, if you know that your brand’s unique selling point is selling environmentally friendly clothing, you could create content around the environmental impact of the clothes industry.

FAQ

FAQs

How much does it cost to start a business?

The cost to register a business in the UK is £50, but additional costs can vary widely depending on the type of business you’re starting. If you want to register your business for free, try ANNA’s company registration service. You will also get a business account, an accounting software and an award-winning customer support who will support you on every step of your journey.    

How do I start a small business with no money?

Consider choosing a simple business model, such as an online business selling services.

What are the most successful small businesses?

Some small businesses known to be successful in the UK include carpet cleaning, removals, and beauty.

How do I set myself up as a small business?

First, you’ll need to register your business with HMRC. Then, set up a business bank account and ensure you comply with your record-keeping obligations.

Can I run a business from my home?

It’s possible to run some kinds of businesses from home, such as services-based businesses or selling products you can make and store at home.

What are the best small businesses to start?

Some promising small businesses to start include tutoring, cleaning, and retail.

Do I need a business degree to start a business?

No. Anyone over the age of 18 can start a business in the UK.

What is the easiest business to start?

Many people find that online service-based businesses are the easiest to start. However, it will depend on your skills and experiences.

Which types of businesses can I start from home?

Online businesses lend themselves well to being run from home since they often only require basic equipment like a laptop.

When is the best time to start a business?

The best time to start a business is when you’re ready – no sooner, no later. You need to wait until you have a feasible idea and the time required to get your business off the ground.

Which business is better to start online or offline?

Either business model can be successful, so choose the option that matches your skills and interests.

Get Ready to Launch

Starting a business in the UK in 2024 is no small feat, but following the steps outlined above maximises your chance of success. No skipping phases!
ANNA is here to support you through your entrepreneurship journey, from registering a company to managing your finances.