Henry and Banwell Chartered Accountants > News > General News > How much does it cost to set up a business?

How much does it cost to set up a business?

  • Posted by: Michael Winkelmann

In true accountant fashion, “it depends”.

Here are a few things that you might want to include in your initial budget.

Setting up a limited company

We can incorporate a company with a name of your choice ( as long as it has not been taken) and register it with HMRC for all the relevant taxes such as corporation tax, self assessment (for the director/shareholders), VAT, Payroll and CIS.

Premises

Most small business start from home. Depending on the nature of your business you may never need premises. If you are using part of your home for business, even if just a corner of the kitchen table that you use for preparing your invoices, then talk to us about how you can claim some of the costs to reduce your tax bill.

You may need to pay for external premises if you need a physical shop front, somewhere for meetings or staff, or additional storage space for stock. If you do not wish to use your home address as your official business address we can offer our address as your Registered Office. We charge £30p.a. You can also pay for virtual offices where they will forward all your official and trading mail to your home address. This would cost around £100 per month but you could shop around for cheaper or more prestigious addresses.

You can store goods fairly cheaply if you don’t need regular access or particularly well regulated environments in container based storage businesses. It is also possible to hire meeting rooms on an hourly rate although you will probably have to pay extra for tea and coffee.

Software

The type of software that you need will depend on the type of business that you run. As a minimum you will need some accounts software such as Xero which starts at £12 per month (including VAT) although all but the smallest businesses will need the £26 package.

You should have a CRM (Customer Relationship Management) database to keep track of your current and prospective customers. There are plenty of free options such as Hubspot and Pipedrive but you may even be able to manage it on a spreadsheet.

You may also need some task management software which can help you to control the workflow through the business. Depending on the software you have chosen you may be able to use your CRM system for this or a free app such as Trello.

Taking on an Employee v Sub-contractor

In the beginning you may need assistance and you need to be careful to deal properly with Employees and their contracts , pension entitlements, HR , WFH policy, operating PAYE, the list can be long.

Before you get to that stage you may use Sub-contractors which are more flexible and less of a commitment. What you need to watch out for is where that Sub-contractor can transition to becoming an Employee if they start working regular hours at your work place with equipment provided by you. I t may not be obvious this has happened until after a period of time and to avoid problems with an HMRC you must monitor this aspect throughout the financial year. Beware, if HMRC carry out an enquiry and they deem a sub-contractor to be an employee if will cost the business owner and not the sub-contractor the taxes and national insurance due on top of payments already made.

Websites

You can build your own website on WordPress or Wix and host it fairly cheaply somewhere like Fasthosts for £7 per month. You will definitely get a better quality website if you use a professional and you should budget £500-£5000 for this depending on how much functionality you require.

Accountant

We definitely recommend paying for a good accountant as they will keep you on the right side of the law, remove a lot of hassle from your business and make sure that you claim all relevant costs in your business. You should budget £500 in the first year for a small start-up.

As you can see there are some things where you can save money by doing things yourself while your business is small and you have more time. As you start to grow we would encourage you to start using professionals who will usually be faster and better than you. They will free you up to focus on the parts of your business that only you can do.