Company Formation for Contractors & Freelancers

How to Form a Limited Company: Step by Step

Forming a limited company is straightforward. Whether you register directly with Companies House, through an accountant, or via a formation agent like our partner Tide, you will need the same core information.

What You Need

• Unique company name — your company name must not already be taken or be too similar to an existing name. It must end with “Limited” or “Ltd”. Many contractors use their own name (e.g. “J Smith Consulting Ltd”). Use a Companies House name checker before applying.
• Registered office address — a UK address for official correspondence. You can use your home address, your accountant’s address, or a virtual office service. This address is public on the Companies House register.
• Director details — full name, date of birth, nationality, residential address and occupation. As a sole-director contractor, this is just your information. From November 2025, identity verification is mandatory for all directors and PSCs under the Economic Crime and Corporate Transparency Act 2023.
• Shareholder and PSC details — most contractor companies have one shareholder (you) holding 100% of shares. As the sole shareholder, you are also the Person with Significant Control (PSC).
• SIC code — a Standard Industrial Classification code describing your business activity. IT contractors typically use 62020 (Information technology consultancy) or 62090 (Other IT service activities). Your accountant can advise on the right code.

Registration in Five Steps

Through our partner Tide, registration takes minutes and your company is typically incorporated within one business day.

What to Do After Your Company Is Formed

Once you receive your Certificate of Incorporation, there are several things you need to do before you start trading:

• Open a business bank account — your limited company must have its own bank account. If you registered through Tide, this is already done. Otherwise, see our contractor bank accounts guide.
• Register for Corporation Tax — you must register with HMRC within three months of starting to trade. Your accountant will typically handle this.
• Register for VAT — mandatory if your taxable turnover exceeds £90,000 (2025/26 threshold). Many contractors register voluntarily to reclaim VAT on expenses.
• Appoint a specialist accountant — a contractor accountant will handle your annual accounts, Corporation Tax returns, payroll, VAT returns and Making Tax Digital compliance.
• Set up payroll — to pay yourself a salary, you need to register as an employer with HMRC and run payroll (your accountant will handle this).
• Get contractor insurance — Professional Indemnity insurance is required by most agencies and clients. Public Liability may also be needed depending on your role.
• File your confirmation statement — due annually to Companies House (£50 online). This confirms your company details are up to date.

How Much Does It Cost to Form a Limited Company?

Company formation costs have changed. Since February 2026, Companies House charges £100 for online incorporation (up from £50). Here is what to expect:

• Direct with Companies House: £100 online, £124 by post, £156 for same-day digital service
• Through Tide: £24.99 — Tide subsidises the Companies House fee and includes a free business bank account
• Through a formation agent: typically £12–£100+ depending on the package and extras (registered office, compliance filing etc.)

Ongoing costs include your annual confirmation statement (£50), accountancy fees (typically £80–£150/month for contractor-specialist firms), and business insurance.

Limited Company vs Sole Trader vs Umbrella

Choosing the right structure depends on your IR35 status, earnings, and how much admin you are willing to handle.

• Limited Company — the standard choice for contractors working outside IR35. Maximum tax efficiency via salary and dividends, limited liability, professional credibility. Requires annual accounts, Corporation Tax returns and payroll. Best for contractors earning above the higher-rate threshold.
• Sole Trader — simpler setup with no Companies House registration, but you have unlimited personal liability and pay income tax on all profits. Less tax-efficient for higher earners. Some agencies will not engage sole traders.
• Umbrella Company — you are employed by the umbrella and paid via PAYE. No company to manage, but significantly less tax-efficient. The standard route for contractors working inside IR35 or on short-term assignments.

For a detailed comparison, see our guide on choosing the right contractor structure. If you are unsure about your IR35 status, seek professional advice before choosing a structure.

Related Contractor Guides

About This Guide

This guide is produced by ContractorUK in partnership with Tide, drawing on ContractorUK’s limited company and formation resources, contributions from specialist contractor accountants and company formation professionals. It covers the key considerations for contractors and freelancers registering a limited company in 2026.

For personalised advice on your company structure, IR35 status and tax planning, speak to a specialist contractor accountant.

Company formation through Tide is subject to Companies House approval. Business bank accounts are provided through ClearBank. To find out more, read Tide’s Terms & Conditions.

Frequently Asked Questions