How to Start a CBD Oil Business in the UK? [Complete Guide]

Did you know that as a major segment of the wider CBD sector, valued at around £600–900 million, CBD oils alone account for 40–50% of that market, translating to roughly £250–450 million in sales?

The opportunity to start a CBD oil business looks real, but so do the concerns. 

Between approval, sourcing compliant manufacturers, and figuring out how to actually make your first legal sale, it’s easy to feel stuck before you even start.

However, starting a CBD oil business in the UK is absolutely doable when you know the right steps.

Read on to learn how to start a CBD oil business on the safe side and turn your business idea into a revenue-generating brand.

Key points

• Compliance is non-negotiable ⚖️
  CBD oil is legal in the UK only if it meets strict requirements, including THC limits, Novel Food authorisation, appropriate lab testing, and accurate labelling without unauthorised medical claims.
• Choosing the right business structure matters 🏢
  A limited company can offer liability protection and a more professional structure when dealing with suppliers and retailers. It can also make managing taxes and bringing in investment easier as your business grows.
• Sourcing and testing quality products is critical 🧪
  Work with reputable UK or EU suppliers that can provide batch-specific Certificates of Analysis and evidence of robust quality control. Reliable testing and compliance with relevant standards are essential for product safety and customer trust.
• ANNA can simplify your business admin 🚀
  While ANNA can’t provide a business account for CBD oil businesses, it can still support you with company registration, automated accounting, invoicing, and tax services, helping you spend less time on admin and more time growing your business.

What does the CBD market size tell you?

The UK CBD oil market is extremely large, and it keeps growing.

It’s projected to grow at a CAGR of 11–35%. eCommerce is driving the surge, accounting for over half of sales. 

Within this market, CBD oil leads the pack, primarily targeting anxiety, sleep, and pain relief for 1.5–2 million regular users aged 25–55. 

Online channels account for 60% of distribution, with London and the South East capturing 40% of the market.

Although imports from EU suppliers remain common, Food Standards Agency (FSA) validations are creating opportunities for local producers.

Is a CBD oil business legal in the UK?

Yes, CBD oil is legal in the UK, but only if it meets strict criteria:

• CBD must be derived from approved industrial hemp strains
• THC must be non-detectable in the final product, ≤0.2% at the raw material stage
• Products must comply with Novel Food regulations
• No medical or health claims can be made
• Products must be safe, tested, and accurately labelled

CBD oil is regulated as a food supplement, not a medicine. Oversight involves the Food Standards Agency (FSA), Trading Standards, and the Home Office.

Many new businesses fail not because of a lack of demand but because they misunderstand compliance.

How to start a CBD oil business in the UK in 8 steps

Here are the key steps to follow when you choose to start your CBD oil business in the UK:

1. Choose your niche

Rather than targeting everyone, you should identify your main customer. Think about the following questions:

• Who are they?
• Where do they shop?
• What price point do they expect?
• What problems are they trying to solve?

Identifying your ideal audience allows you to focus on the specific niche and its use cases, such as:

• Sleep & stress support
• Pain & inflammation
• Sports recovery
• General wellness
• Premium or organic CBD oils

A focused niche makes branding, messaging, and compliance easier and more effective.

2. Choose the business structure

Before you can sell a single bottle of CBD oil, you need to set up a legitimate, compliant business structure. Because CBD sits in a regulated and often misunderstood sector, getting this step right early will save you significant friction later.

In the UK, most new CBD oil businesses choose between operating as a sole trader or forming a limited company.

Sole trader

This is the simplest and cheapest option to set up. You register with HMRC, trade under your own name or a business name, and report profits through Self Assessment. However, you are personally liable for any debts or legal issues, which can be risky in a regulated product category like CBD. 

Sole traders can also struggle with banking, insurance, and wholesale credibility.

Limited company

This is the most common and recommended route for CBD brands.

A limited company is a separate legal entity, which offers personal liability protection and appears far more professional to suppliers, insurers, payment processors, and retail partners. 

It’s also more tax-efficient once you begin generating consistent profits, making it easier to raise investment or sell the business in the future.

For most CBD entrepreneurs, especially those aiming to build a brand rather than a side hustle, a limited company is the safer and more scalable option.

3. Register your business

How you register depends on the type of business setup you’ve chosen.

Operating as a sole trader

If you’re operating as a sole trader, the process is handled directly through HMRC. 

You’ll need to create an online account and sign up for Self Assessment by completing their registration form. 

During this step, HMRC will ask for some basic information, including your full name, National Insurance number, business name if you’re trading under one, business address, the type of work you’re doing, and the date you began trading.

After registering, HMRC will post a 10-digit Unique Taxpayer Reference (UTR) to you, which typically arrives within 10–15 working days. This number is essential, as you’ll use it whenever you file tax returns or interact with HMRC.

There’s no cost to register as a sole trader, but you will be responsible for paying income tax and National Insurance contributions on any profits your business makes.

Operating as a limited company

If you choose to form a limited company, registration is done through Companies House, includes a £50 fee, and typically takes 24–48 hours.

You’ll need to:

1. Pick a unique company name
2. Appoint at least one director
3. Provide a registered office address
4. Select a SIC code: The primary SIC code for a UK CBD oil business is 10890, for manufacturing food supplements, with alternative codes based on specific activities.

1. Decide on share structure: Most startups issue 1–100 ordinary shares.

Once registered, you’ll receive:

• A Certificate of Incorporation
• A company number
• Confirmation of directors and shareholders

These documents are necessary to open bank accounts, purchase insurance policies, and enter into supplier agreements.

4. Register for taxes and VAT

CBD oil businesses in the UK are subject to standard 20% VAT as food supplements or novel foods, with mandatory registration once taxable turnover exceeds £90,000 in any 12-month period.

When it comes to VAT, the key thing to remember is that you need to add 20% on top of your net selling price before you invoice anything or take payment. 

So, if you’re selling a bottle of CBD oil for £10 excluding VAT, the final price should be £12, with £2 clearly shown as VAT. 

Whether you’re selling online, in-store, or through wholesale channels, the VAT amount and rate should always be visible on invoices, receipts, or at checkout.

This keeps you compliant with the Price Marking Order and avoids any awkward surprises for customers at checkout.

This applies to all UK domestic sales, and getting it wrong can be expensive. If VAT isn’t charged correctly, HMRC can recover the unpaid amount and add penalties of up to 100% of the VAT owed, plus interest. 

Reclaiming input VAT

One upside of being VAT-registered is that you can reclaim VAT on many of your business costs, which can make a real difference to cash flow, especially in a compliance-heavy industry like CBD. 

This includes things like lab testing (often £100–£500 per sample), compliant packaging, Shopify and software fees, and even insurance. Keep in mind that VAT on non-compliant imports, or on anything used for personal purposes, can’t be claimed back.

Pro tip

Make sure you save digital VAT invoices for at least six years, as HMRC can ask to see them. 

Other taxes

Besides VAT, you need to take into account the following taxes:

Worth a look

ANNA keeps your taxes organised and compliant, no matter how your business is set up. 

Instead of juggling spreadsheets and deadlines, everything is handled in one place. 

We calculate the most tax-efficient amounts you need to pay, prepare and submit your Corporation Tax straight to HMRC, and take care of VAT returns as they’re due.

We also handle PAYE if you have staff, automatically create and track invoices, and pull everything together into your year-end financial statements, which are then filed for you. 

5. Arrange product liability insurance

When you’re selling CBD oil, product liability insurance is a must. 

If a customer claims your product caused them harm or an adverse reaction, this insurance protects your business from potentially significant financial claims.

Most retailers, wholesalers, and online marketplaces won’t work with you without it, so it’s also key for getting your products out there.

When you’re setting it up, make sure your policy specifically mentions CBD oil, not just ‘supplements’. It’s also advisable to go with an insurer that knows the supplement or CBD sector, because many standard policies won’t automatically cover hemp-derived products. 

Check the coverage limits, which usually range from £1–5 million, and ensure the coverage includes both online and in-store sales.

6. Source compliant CBD oil products

Your choice of supplier is one of the most critical decisions you’ll make as a CBD entrepreneur. The right supplier ensures your products are safe, legal, and consistent, while the wrong one can lead to compliance issues, poor product quality, or even fines from the authorities.

UK vs EU Suppliers

When it comes to sourcing CBD oil, you have two main options: UK-based suppliers or EU-based suppliers.

• EU suppliers: These dominate the market because the hemp industry is more mature in many European countries. They often have years of experience producing high-quality, fully compliant hemp extracts and can provide detailed testing documentation. Working with an EU supplier can be a reliable way to access proven products, but you’ll need to ensure all imports meet UK Novel Food regulations and THC limits.
• UK producers: The domestic CBD sector is growing rapidly, especially as more companies complete FSA validations. Sourcing locally can give you faster shipping, easier communication, and reduced import complexities, plus the appeal of a ‘made in the UK’ label for consumers. Supporting UK producers can also simplify traceability and demonstrate compliance to regulators.

In practice, many successful UK brands use a mix of both, choosing EU suppliers for consistency and UK producers for marketing appeal or niche products.

What to look for in a supplier?

To protect your business and ensure regulatory compliance, pay attention to these key factors:

• Third-party Certificates of Analysis (COAs): Every batch should be independently tested to verify CBD and THC levels, as well as purity and absence of contaminants. Ask for recent COAs, not just generic lab results.
• Traceable hemp source: Know exactly where the hemp comes from. Is it from certified industrial hemp strains? Is the farm compliant with EU or UK regulations? Traceability matters for compliance and quality assurance.
• Approved extraction methods: CO₂ extraction is considered the gold standard because it preserves cannabinoids while avoiding solvents. Ask how the oil is extracted and processed to ensure safety and quality.
• Batch consistency and transparency: Customers expect the same potency, flavour, and effect every time. Make sure your supplier has robust quality control systems and can provide documentation for each batch.

Your reputation, legal standing, and long-term success depend on sourcing products that are fully compliant, safe, and reliable. If a supplier can’t confidently answer questions about THC levels, Novel Food compliance, or testing protocols, it’s a major red flag. 

7. Meet the current Novel Food requirements for CBD products

CBD products, including oils, are still considered novel foods in the UK, which means you can’t legally sell them without pre-market approval from the Food Standards Agency (FSA).

To get approval, you need to submit a full Novel Food application packed with safety information. This includes:

• Toxicology data
• Details of human consumption history
• Your proposed daily intake (usually 10mg per day or less for products that are at least 98% pure)
• Information about how the product is made, including contaminant limits

If the application is complete, the FSA usually validates it within a few weeks. But if anything’s missing or incorrect, it will be rejected, and you can’t market or sell the product until full authorisation is granted. 

What you need to know about standards and accredited labs

If you’re selling CBD products in the UK, including oils, lab testing isn’t optional.

Tests confirm that your products comply with the FSA novel food standards, such as: 

• Keeping THC below 0.2%
• Ensuring high CBD purity (usually 98%+ for isolates)
• Confirming there are no contaminants such as heavy metals, pesticides, or microbes

All testing must follow ISO/IEC 17025 standards, the international benchmark for lab competence and accuracy. This guarantees that results are precise, traceable, and accepted by regulators.

Make sure your lab can handle tests like potency (via HPLC), cannabinoid profiles, and residual solvents. 

Reports should be batch-specific, with detection limits aligned with FSA guidance. For example, Δ9-THC must be ≤70µg/day.

Keep COAs for audits, and remember that third-party verification is strongly recommended over in-house testing to add credibility and regulatory confidence.

Opt for United Kingdom Accreditation Service (UKAS)-accredited labs like Eurofins (No. 1574 for ISO 17025) or LGC.

Non-UKAS labs risk rejection in FSA applications.

8. Follow packaging and labelling rules

CBD retailers in the UK must follow strict packaging and labelling rules under Food Standards Agency (FSA) guidance and Food Information Regulations.

Labels require:

• The product name
• Ingredients list in descending order
• CBD quantity per serving/container
• Net quantity
• Batch number
• Expiry date
• Storage instructions
• Allergen warnings if applicable

You can’t make any medical claims, disease references, or misleading wellness promises. 

When it comes to packaging your CBD oils, safety and quality come first. Use child-resistant, tamper-evident, and opaque containers to make sure the product isn’t appealing or accessible to minors.

Follow Poison Prevention standards where they apply to ingestible products. 

On top of that, choose UV-protective, airtight materials to keep your oils fresh and stable.

What are the estimated startup costs for a CBD oil business?

If you’re planning to launch a CBD oil business, you should be prepared to set aside a significant part of your budget for compliance and inventory because of the strict requirements under the FSA Novel Food rules.

How to win your first clients?

Getting your first customers is all about making your CBD brand visible, trustworthy, and easy to buy from. 

Whether you’re selling online, in retail, or through wholesale, your approach should focus on accessibility, education, and compliance.

The first thing you should do is set up your sales channels:

• Online store: Platforms like Shopify or WooCommerce make it easy to launch quickly. Make sure to include age verification if required.
• Retail & wholesale: Local health shops, gyms, or wellness boutiques are great starting points. 

You should also market your brand legally:

• SEO & content marketing: Educate potential customers through blogs, guides, or FAQs on CBD wellness, dosage tips, and choosing high-quality products. Avoid making medical claims.
• Email marketing: Build a client list and send informative updates, product news, and promotions to nurture early relationships.
• Influencers & PR: Partner with wellness influencers or feature in media outlets to build credibility, keeping messaging compliant and informative.
• Alternative advertising: Use podcasts, native ads, or affiliate programs to reach audiences where Google and Meta ads aren’t allowed.

How to start a CBD oil business with ANNA?

ANNA makes running your CBD business stress-free from day one. 

It’s an all-in-one business account that handles your money, invoices, expenses, bookkeeping, and taxes, and enables you to register your company with Companies House in minutes.

Behind the scenes, smart automation and AI handle the tricky, time-consuming tasks that usually require an accountant. 

That means your books stay accurate, your taxes are filed on time, and you remain fully compliant, without the usual high cost or hassle. You can spend 90% less than you would when hiring a traditional accountant or subscribing to accounting software.

What else have we got in store for you?

🔥ANNA’s free Name Checker lets you check if your chosen business name is available. If it’s taken, it provides a list of clever alternatives based on your keywords.

🔥 Especially suitable for CBD businesses, you can register an eCommerce company and open a business account that integrates with Shopify, WooCommerce, Etsy, eBay, and Amazon.

All your sales and profits are automatically imported into ANNA and used to calculate and file your taxes with HMRC.

🔥 Our Making Tax Digital (MTD) service will help you file taxes digitally four times a year. Your first year of MTD service is 100% discounted and includes automatic collection of your business data, preparation of returns, and filing for you.

Unfortunately, we’re unable to provide a business account for businesses that sell CBD oil, as this falls under our prohibited business categories. 

We understand this may be disappointing, but we’d still be happy to support you with company registration, administrative services, and tax support to help you get your business set up and running. 

Try ANNA today and ditch the paperwork while keeping profits.