Setting up a limited company for your freelance business

Running a freelance business in the UK often begins with the straightforward sole trader route. It's simple, quick to set up and easy to manage – and for many, it works perfectly for a while. But as your freelance business evolves, you might find yourself asking: is there a better way to operate?

Perhaps your income is growing, you want to project a more established image, or you're seeking greater personal protection. Whatever your motivation, transitioning to a limited company could unlock significant advantages financially, legally and professionally.

This guide will walk you through the process of incorporating a limited company in the UK. It explores the potential benefits, important considerations and how a dedicated business bank account, like those offered by Zempler, can simplify your journey.

Why freelancers go limited

Many freelancers operate as sole traders for years, and for good reason: it's straightforward, inexpensive and low on administration. However, as your earnings increase, your operations change or you begin to attract larger clients, a limited company structure may become more suitable.

Here are some of the reasons why freelancers consider going limited:

• Limited liability protection – A crucial benefit is the separation of your personal finances from your company's. This means that, in most cases, your personal assets are protected if your business faces financial difficulties.
• Potential tax efficiency – Operating as a limited company can offer opportunities for tax optimisation. You might be able to take income through a combination of salary and dividends, potentially reducing your overall tax burden. Important: actual tax outcomes depend on your individual circumstances. Always consult a qualified accountant for personalised tax advice.
• Enhanced credibility and professionalism – Many larger organisations and corporate clients prefer to work with limited companies, viewing them as more established and professional. This can open doors to bigger contracts and more lucrative opportunities.
• Flexibility for growth – A limited company provides a robust legal and financial framework, making it easier to scale your business, take on employees or even attract investment in the future.

While these benefits can be significant, it's vital to acknowledge that running a limited company also comes with more administrative demands and ongoing compliance requirements. You should always carefully weigh these additional responsibilities and potential risks against the perceived benefits.

Check out our guide: Sole trader vs limited company: which is right for your business?

The downsides and risks of becoming a limited company for freelancers

Before making the switch, it's essential to understand the full picture. While beneficial, a limited company isn't without its challenges:

• More admin and paperwork – You'll face more formal accounting requirements, stricter deadlines and added paperwork as a limited company. This includes the need to file annual accounts and company tax returns.
• Less financial privacy – Details about your company, including financial statements, shareholder and director information, will be made publicly accessible on the Companies House register.
• Higher operating costs – You may face more costs for professional services, like accountancy and legal advice, due to the added complexity, reporting obligations and demands of running a limited company.
• Limits to liability protection – There may be occasions where the limited liability associated with this arrangement will not apply.

Pro tip: Always discuss your specific circumstances and business goals with a qualified accountant or solicitor to ensure the limited company structure aligns with your needs and to fully understand your obligations.

Related reading: The pros and cons of limited companies

Checklist for setting up your limited company in the UK

Registering a limited company in the UK is often simpler than you might anticipate. You can typically complete the entire process online in around an hour.

Here's how to do it:

1. Choose your company name

Your chosen company name must be unique and not too similar to existing companies registered with Companies House. It must also end with "Limited" or "Ltd." You can check name availability with Zempler Bank’s name checking tool.

2. Register with Companies House

To go limited you need to register your business with Companies House:

• With Zempler Bank’s formation service you can register your company and get £100 if you open a bank account.
• Or you can use the GOV.UK company registration service

If you're unsure about company structures or what your financial and legal obligations are, you should seek professional advice first.

3. Register for corporation tax with HMRC

Within three months of starting to trade, you must register your new limited company for Corporation Tax through your online HMRC account.

Rates and obligations can change, so it’s wise to get professional tax advice to make sure you’re compliant and optimise your tax position.

4. Open a dedicated business bank account

As a limited company is a separate legal entity from you personally, it’s a legal requirement to have a separate business bank account for your company's finances. This ensures your business and personal finances are kept separate, giving you financial clarity and simplifying your tax compliance.

Zempler Bank offers dedicated business accounts specifically designed for freelancers and small businesses. Our accounts feature quick online setup and transparent fees, making it straightforward to manage your company's finances from day one.

Compare our business account fees and features.

5. Understand your ongoing responsibilities

Running a limited company involves continuous compliance. Key ongoing responsibilities include (but aren’t limited to):

• Submitting annual account and confirmation statements to Companies House
• Filing annual Company Tax Returns with HMRC
• Paying Corporation Tax on your company's profits
• Maintaining accurate financial records and statutory registers
• Meeting Identity verification requirements for Companies House
• Registering for VAT if your company's turnover exceeds the threshold – currently £90,000
• Complying with Making Tax Digital (MTD) for VAT if registered, which requires using approved software for record-keeping and submissions

Professional advice from an accountant can be invaluable here to help you navigate these obligations, stay compliant and avoid any potential penalties.

Why choose Zempler for your freelance business account?

We designed Zempler Bank specifically with freelancers and small businesses in mind, building features to streamline your financial management:

• Fast online set up – Apply for your business account quickly and easily online, without needing to visit a branch or complete lengthy paperwork.
• Transparent pricing – We believe in clarity. Our accounts come with straightforward, clearly defined fees so you know exactly what you’re paying for. And our Business Go account has no monthly fee.
• Financial tools that make life easier – Get immediate insight into your company's finances. Track your spending, categorise expenses automatically, and simplify how you manage cash flow on our intuitive platform.
• UK-based support – No issue with your bank account is too big or too small for our team. We're here to help.
• Designed for growth – Whether you plan to remain a solo operation or scale your business in the future, Zempler provides a strong financial foundation to grow from.

Ready to go limited?

Zempler Formations: an easier, smarter way to set up your company

We created our Company Formations Service for people who don’t want to spend their first few days as a business owner navigating red tape.

It combines registering your limited company with applying for and opening a business bank account, so you can do both at once. No need to bounce between websites or chase down missing documents, and no confusing paperwork. Just a seamless, all-in-one setup built for micro businesses and SMEs.

What’s included:

• UK limited company registration with Companies House
• Dedicated business bank account
• Access to digital tools to manage your finances
• Transparent, competitive pricing

If you're looking for a cost-effective and time-saving way to get started as a limited company, bundling these mandatory actions together is often the smarter option. With Zempler, you’re not just registering your company, you’re setting yourself up for success.

Learn more about registering your business with Zempler Bank

Take your freelance business to the next level

Switching from a sole trader to a limited company status is a significant strategic decision that can impact your business financially, legally and operationally. While it offers potential benefits like enhanced credibility and tax efficiency, it also brings additional responsibilities and costs.

Take your time to consider the pros and cons carefully, assess your personal and professional circumstances, and align the decision with your long-term business goals. Always seek professional advice from a qualified accountant or solicitor before making any firm commitments.

When you're ready to make the leap, Zempler Bank is here to help you manage your finances with clarity, transparency and convenience. Open your Zempler business account today and focus on what truly matters: growing your successful freelance business.