Company formation costs: the real first-year budget

Start with the official fees

From 1 February 2026, the Companies House digital incorporation fee is £100 and the paper incorporation fee is £124. The digital confirmation statement fee is £50 for the first statement in a 12-month payment period; the paper fee is £62. Check the current fee schedule before submitting a filing.

A confirmation statement fee is not a payment for preparing accounts or filing a Company Tax Return. A service provider may add its own preparation or filing charge on top of a government fee.

Headline price versus total price: five providers compared

Formation agents advertise prices in two different ways. Some quote a single price that already covers the £100 Companies House fee (often subsidised by a linked bank account or subscription). Others quote a small package fee and add the £100 government fee at checkout. A £2.99 headline can therefore cost more than a £14.99 one.

The table below converts each selected entry offer to the amount you pay for the formation itself, using prices published by each provider and checked on 14 October 2026. It excludes optional extras, renewals and ongoing account or accounting fees.

Worth knowing: Compare the checkout total and any condition attached to it, not the headline number. Mint, Rapid and Your Company Formations totals assume the £100 fee is passed through unchanged; confirm VAT treatment at checkout.

Why a provider may charge less than Companies House

Some formation packages combine registration with opening a business account, and subsidise the filing fee as a customer-acquisition offer. A lower advertised registration price does not mean Companies House charges that lower amount directly.

Compare the current packages on our offers page, then read the provider’s eligibility conditions. Account approval is separate from incorporation. A reward may require spending, deposits, deadlines or a specific referral link, and should not be treated as guaranteed money in your startup budget.

Build a first-year cost checklist

Your actual budget depends on activity, ownership and the services you buy. Use the headings below to request quotes; these are cost categories, not promised prices.

• Registration: government filing fee, provider charge and any optional expedited service.
• Addresses: registered office and director service address, mail forwarding and renewal price.
• Compliance: confirmation statement fee and any paid filing assistance.
• Accounting: bookkeeping software, accountant, company accounts and Corporation Tax work.
• Banking: monthly plan, transfers, cash deposits, foreign exchange and cards.
• Employment: payroll, pension duties, employer taxes and insurance where applicable.
• Operational costs: licences, contracts, professional indemnity or other relevant cover.

Read the renewal price, not just the first-year price

An introductory address service or accounting discount can expire before your first filing cycle finishes. Record whether the package renews automatically, how much notice is needed to cancel and what happens to your official mail if you leave.

VAT treatment can vary across package components. Check whether displayed provider service prices include VAT and whether the filing fee is shown separately. Ask the provider for the total payable rather than adding up headline figures yourself.

Keep registration spend separate from tax reserves

Low registration cost does not make the business free to run. Reserve cash for tax and ongoing commitments as revenue arrives. Do not spend all account receipts or a conditional reward before the underlying liabilities are understood.

For a useful comparison, calculate both the initial checkout total and the expected ongoing annual cost. Add the services you genuinely need to each provider’s base offer so that a standalone formation is compared fairly with a bundled account package.

Worth knowing: A £0 monthly account plan can still have transaction charges, and an included filing service may exclude the government fee.

Build a first-year budget that does not confuse fees with tax

An incorporation price is not an operating budget. Use separate lines for the government registration fee, the provider’s service, optional addresses, bookkeeping, accounts and tax preparation, payroll, bank transactions and software. Confirmation-statement filing is separate from accounts. A provider may include preparing a statement but exclude the government filing charge; ask for the total.

Illustrative example, not a provider quote: suppose formation is £100, address services £180, annual accounts and tax support £900, software £240 and a digital confirmation statement £50. Those selected items total £1,470 before any VAT charged on services, banking, payroll or other operating expenses. A subsidised registration changes only the formation line unless the package expressly includes other work.

Add a renewal column alongside the first-year figure. A service included initially can become a recurring charge, while a promotional subscription can revert to a standard price. Record whether prices include VAT, whether payment is monthly or annual, and whether a minimum term applies. Incorporation filing fees and taxable provider services can have different VAT treatment.

Worth knowing: Corporation Tax reserves are not an accountancy fee. Keep money for tax separately from the cost of preparing the return.

Read the subsidy and cancellation terms before comparing net prices

Tide and ANNA subsidise registration through an account relationship. Compare account eligibility and ongoing costs alongside the formation discount. ANNA’s Just Register page states £19 + VAT and requires opening its account within 10 days of incorporation; it says the £100 filing fee will be charged if that condition is not met. Account conditions therefore belong in your formation budget.

A reward should be shown as a conditional scenario, not deducted from the guaranteed cost. For NEW200, a founder meeting only the spend requirement should not budget for the savings component. Do not borrow or lock up working capital merely to make a comparison’s headline “net cost” negative.

Before buying an address or filing subscription, ask how cancellation affects mail access, who changes the registered office and whether documents remain downloadable. Saving a small setup fee is poor value if leaving creates missed official post or an unexpected annual renewal.

Director ID Verification: Costs and Timelines from 2025

A significant change impacting all new UK companies is the mandatory identity verification for directors and Persons with Significant Control (PSCs), effective since 18 November 2025. This measure, part of the Economic Crime and Corporate Transparency Act, is designed to increase corporate transparency and combat fraud by ensuring that every individual controlling a company is verifiably who they claim to be. This isn't just a one-off check at incorporation; it applies to all new and existing directors and PSCs. For first-year budgeting, this introduces a new, unavoidable cost category. The cost and time involved depend entirely on the method you choose: going directly through Companies House's digital service or using an authorised third-party provider, such as your formation agent or accountant.

Choosing your verification route is a trade-off between direct cost, speed, and convenience. The direct Companies House route is designed to be the lowest-cost option but may involve more steps for the individual director, potentially using a combination of official documents and digital identity apps. Using a formation agent as an authorised third party often streamlines the process. They integrate verification into the company formation workflow, which can be faster and provide support if issues arise. However, agents will charge a fee for this service, which can range from a nominal amount to a more significant charge, depending on the complexity and level of service provided. It's crucial to factor this fee into your total formation cost when comparing providers.

Worth knowing: Mandatory ID verification adds a new cost layer; using a formation agent can be faster but more expensive than the direct Companies House route.

Choosing Your Registered Office: A Cost and Privacy Comparison

Every UK limited company must have a registered office address located in the UK. This address is placed on the public record at Companies House and is where all official correspondence from HMRC and Companies House will be sent. A common mistake for new entrepreneurs is to simply use their home address to save money. While free, this decision has significant drawbacks. It makes your private residential address publicly accessible to anyone, including clients, suppliers, and marketing agencies, creating both privacy and security risks. It can also create an unprofessional impression and may be prohibited by your mortgage lender, tenancy agreement, or local council planning rules.

Professional registered office services offer a cost-effective solution. These services provide a legitimate commercial address for your company, protecting your home privacy. The mail received is then forwarded or scanned and emailed to you. Costs vary based on location and the level of service. A basic mail forwarding service in a standard location is highly affordable. For a more premium image, a 'prestige' address in a major city like London is more expensive but can enhance your company's credibility. Some accountants also offer the use of their office address as part of a broader service package, which can be a convenient option. When budgeting, this is a small but critical annual expense that buys privacy and professionalism.

Worth knowing: Using a professional registered office service is a low-cost annual fee that is essential for protecting your personal privacy and maintaining a professional image.

Beyond Director Pay: The Real Cost of Your First Employee

While you may pay yourself a director's salary, the financial landscape changes dramatically when you hire your first non-director employee. This step triggers a range of new, recurring costs and administrative duties that must be factored into your budget. First, you must register as an employer with HMRC before the first payday, a process that is free but requires time. You will then need to operate a PAYE (Pay As You Earn) scheme, calculating and deducting income tax and National Insurance from your employee's pay and paying it to HMRC. You will also be liable for Employer's National Insurance Contributions (NICs), a significant extra cost on top of the gross salary.

As of the 2026/27 tax year, Employer's NICs are charged at 15% on earnings above the secondary threshold of £5,000 per year. However, many small businesses can claim the Employment Allowance, which allows you to reduce your annual NICs liability by up to £10,500. This can eliminate the NICs cost for your first employee entirely if their salary is not excessively high. Additionally, you are legally required to automatically enrol eligible employees into a workplace pension scheme and contribute a minimum percentage of their qualifying earnings. Finally, you will need payroll software to manage calculations and report to HMRC, which carries a monthly subscription fee. These combined costs mean a £30,000 salary can easily cost the business over £32,000 per year, even with allowances.

Worth knowing: The chart assumes the company is eligible for the full Employment Allowance, which negates the £3,750 Employer's NICs liability on a £30,000 salary, but pension and software costs remain.

Mandatory Data Protection Fees: Do You Need to Pay the ICO?

An often-overlooked but legally required cost for most new companies is the annual data protection fee paid to the Information Commissioner's Office (ICO). Under the Data Protection Act 2018, if your company processes personal data, you are almost certainly required to register with the ICO and pay this fee. 'Processing personal data' is defined very broadly; it includes electronically storing information about any identifiable living individual. This means if you hold customer lists, have employee records, or even just store contact details for suppliers, you must pay. The fee is not optional and failure to pay can result in a fine of up to £4,000, which is significantly more than the fee itself.

The amount you pay is determined by a three-tier system based on your company's turnover and number of staff. For the vast majority of first-year businesses, the cost will fall into Tier 1. It is your responsibility to assess which tier you fall into and pay the correct fee. Payment is made directly to the ICO via their website. Many business owners mistakenly believe this is an optional registration or that it doesn't apply to small online businesses, but this is incorrect. Budgeting for this small annual fee from day one ensures you remain compliant and avoid the risk of unnecessary and easily avoidable penalties. This should be considered a standard, recurring cost of doing business in the UK.

Worth knowing: The ICO data protection fee is a legal requirement for almost every company; for most startups, it will be the Tier 1 fee of £52 per year.

Worked Example: How Corporation Tax Marginal Relief Works

Since April 2023, UK Corporation Tax is no longer a single flat rate. Companies with profits up to £50,000 pay the 'small profits rate' of 19%, while those with profits over £250,000 pay the 'main rate' of 25%. For companies with profits falling between these two thresholds, a system called 'Marginal Relief' applies. This prevents a sudden, sharp tax increase for growing businesses and effectively creates a tapered rate that gradually increases from 19% towards 25%. Understanding how this calculation works is vital for accurate financial forecasting and ensuring you set aside the correct amount for your first-year tax bill. It is not as simple as paying 19% on the first £50,000 and 25% on the rest.

The calculation starts by working out the tax at the higher 25% rate, and then subtracting a relief amount. The relief is calculated using a formula set by HMRC. Let's walk through an illustrative example for a company with £100,000 of taxable profit in the 2026/27 tax year. The process shows that the effective tax rate is 22.75%, sitting between the small profits rate and the main rate. Budgeting for this 'in-between' rate is a common point of failure for newly profitable companies, who may either under-reserve by sticking to the 19% figure or over-reserve by assuming the full 25% applies prematurely.

1. 1

   Start with the company's annual taxable profit. For this illustration, assume a profit of £100,000.

2. 2

   Calculate the tax at the main rate of 25% on the full profit: £100,000 x 0.25 = £25,000.

3. 3

   Calculate the Marginal Relief amount. The formula is (Upper Limit - Profit) x Marginal Relief Fraction. The fraction for the 2026/27 tax year is 3/200. So, the calculation is: (£250,000 - £100,000) x 3/200 = £150,000 x 0.015 = £2,250.

4. 4

   Subtract the relief from the main rate tax calculation: £25,000 - £2,250 = £22,750.

5. 5

   The final Corporation Tax liability is £22,750. This gives an effective tax rate of 22.75% on the £100,000 profit.

Worth knowing: Marginal relief creates a tapered tax rate for profits between £50,000 and £250,000, so don't budget for a simple jump from 19% to 25%.

The True Cost of a 'Free' Business Bank Account

Many company formation packages prominently feature a 'free' business bank account from a partner bank. While tempting, it's essential to scrutinise what 'free' actually means. Typically, this refers to an introductory period, often 12 to 24 months, during which the bank waives its standard monthly account fee. After this period, you will be moved onto a standard tariff, which may involve monthly charges, fees per transaction, and costs for depositing cash or cheques. Accepting the bundled offer for convenience can lead to higher long-term costs if the account is not a good fit for your business model.

The real cost of a 'free' account can be the opportunity cost. The bundled account may lack features you need, such as good integration with your accounting software (like Xero or QuickBooks), competitive international payment fees, or a decent mobile app. Switching bank accounts later is a significant administrative hassle, involving updating clients, suppliers, and payment systems. Therefore, before accepting the 'free' offer, you should assess it against your predicted business activity. A company making hundreds of small online payments has very different needs from one receiving a few large international bank transfers. It is often wiser to research the banking market independently and choose an account that suits your long-term needs, even if it has a small monthly fee from day one.

• What is the standard monthly account fee after the free period ends?
• Are there limits on the number of free electronic payments or bank transfers per month?
• What are the charges for depositing cash or cheques into the account?
• How much does it cost to send or receive international payments?
• Does the account integrate seamlessly with the accounting software you plan to use?
• What are the overdraft interest rates and arrangement fees, should you ever need one?

Worth knowing: A 'free' bank account is only free for an introductory period; evaluate its long-term fees and features against your business needs before committing.

Planning for the End: The Costs of Closing Your Company

While entrepreneurs focus on success, a prudent business plan acknowledges the possibility of closure and its associated costs. Understanding the exit routes from the outset can prevent future financial and legal headaches. If your company is solvent (i.e., it can pay its bills), you have two main options: a Members' Voluntary Liquidation (MVL) or a simple dissolution (also known as 'striking off'). The choice depends almost entirely on the value left in the company. An MVL is a formal process run by a licensed Insolvency Practitioner, designed to extract funds in a tax-efficient manner. Dissolution is a much simpler, cheaper process for closing a company with little or no retained value.

For a company with assets of less than £25,000, dissolution is usually the best path. The process involves settling all debts, closing the company bank account, and submitting a DS01 form to Companies House with a £10 fee. You must also notify interested parties, such as creditors. However, if your company has retained profits over £25,000, distributing this as a dividend would be subject to dividend tax. An MVL allows these funds to be distributed as a capital gain. With Business Asset Disposal Relief (BADR), this could be taxed at the reduced rate of 18% (as of April 2026), which is often far lower than higher-rate dividend tax. The downside is that an Insolvency Practitioner's fees for an MVL are substantial, typically starting from £2,000-£3,000, and must be budgeted for.

• Final Accountant's Fees: For preparing and filing final company accounts and tax returns, regardless of the closure method. This can cost £500-£1,500.
• Insolvency Practitioner's Fees (MVL only): The largest cost, typically starting from £2,000 for a straightforward case. Essential for tax-efficient closure of a cash-rich company.
• Dissolution (Strike-Off) Fee: A statutory fee of £10 paid to Companies House to process the DS01 form.
• Gazette Notice: A small fee for the mandatory advertisement of the proposed dissolution or liquidation in The Gazette.
• Contingency Fund: A small budget for unforeseen final costs, like final payroll runs, software cancellation fees, or mail redirection.

Worth knowing: A simple dissolution costs very little, but if your company has significant retained profits, budgeting for expensive MVL fees is crucial for a tax-efficient exit.

Common questions

Official sources & further reading

This guide draws on the official guidance below. Rules, fees and individual circumstances can change; check the relevant source before acting.

• Companies House: current fees
• GOV.UK: Register a company
• ANNA: Registration price and account subsidy condition

General UK information, primarily for private companies limited by shares. This is not personalised legal, tax or financial advice. An accountant or solicitor can help apply the rules to your situation.