Business startup

costs in the UK:

what to consider
by Lauren Hellicar
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Business startup costs in the UK:

what to consider 2
 While there can be significant costs to consider
when starting a business – and potentially even
more once you’re up and running – a little forward
planning can help you figure out if your business
idea is financially feasible.

How much does it cost to So what are some of the most important

set up a business? costs of starting a business?

This is an important question to answer for

Business advice
the specific business you want to set up,

as costs can vary greatly depending on the Many new business owners don’t seek any

location and industry you want to get into. professional advice before starting their

venture, yet the planning stages of a startup

Once you have the answer, it’s important to
are likely to be the most important. It may, for
work out whether you have access to the
example, help you to get professional advice
funds you’ll need to get started and then
to choose your legal and financial model.
keep your business going.

Read through our advice and resources for UK

According to the Office for National Statistics
small businesses for some helpful signposts.
(ONS) less than half (44.1 per cent) of the UK

businesses that were started up in 2011 were It’s worth considering how much you might

still going five years later. need to spend on legal advice and the services

of an accountant.
Unexpected costs and poor budgeting

are two of the main reasons for the high Many solicitors and accountants will give a first

business failure rate. consultation for free, particularly if they think

you’re likely to go on to be a regular client.

Business startup costs in the UK:

what to consider 3
If you expect your business finances to be agent, solicitor or accountant, which will

particularly complex, you may want to think incur a fee.

about paying an accountant a retainer fee

so you can consult them whenever you Business premises

need advice.
Unless you’re planning to work from home,

you’ll need to find business premises.

Company incorporation
Relatively few businesses own their own

Depending on your circumstances you might premises – instead, most lease from a

choose to set up a limited company. commercial landlord.

While it is relatively cheap to do this directly Many commercial leases, particularly those

through Companies House, most people for retail premises, operate on a quarterly

choose to use an intermediary firm to rather than a monthly basis. This can mean

complete the paperwork. that you’re landed with a hefty bill every three

months, rather than a smaller bill each month.

This process starts at less than £10 for the

most basic online service, but can easily run This can be one of the main reasons retail

to hundreds of pounds, particularly if you use businesses run into financial difficulties, so it’s

a registered office. worth making sure you plan for this before

you set up shop.

It’s also worth remembering that The

Companies Act requires company directors If you need office space rather than retail

to provide their ‘usual residential address’ premises, you might want to consider serviced

to Companies House. office leases. These offer you far greater

freedom, shorter agreements, scalability, and

If you also choose to provide your home
the opportunity to pay monthly.
address as the ‘service address’, this will be

on public record. You can choose to use Finally, serviced leases almost always include

an address hosting service with a formation business rates, which can otherwise be a

Business startup costs in the UK:

what to consider 4
major financial burden over and above a Tools and equipment can also be a big upfront

regular lease. expense as you’ll need these to do your work

from the day you launch your business.

Even if you choose to work from home,

there’ll still be setup costs. You’ll almost

Marketing
certainly need to buy office furniture and

computer equipment, and being at home all Marketing can be another big outlay for

the time will push up your monthly utility bills. a new business. To make sure your new

venture gets off on the right foot, and that

Stock, tools and equipment customers keep coming back for more, you

need to make sure that people know about

If you’re starting a retail business, stock is
your business and what it offers.
likely to be one of your biggest expenses.

The type of marketing you do and the cost

Suppliers will mostly offer you 30 days’ credit –
can vary wildly. While many offline marketing
or more, in some circumstances. You can take
methods such as direct mail involve big initial
advantage of this to help ease any cashflow
outlays, some online marketing techniques
problems during your first month of business.
are very cheap.

You might want to put off buying stock until

For example, optimising your website to
the last possible moment to make the most
ensure that you’re well placed in search
of your credit period.
engine results is a low-cost but highly

The amount you spend on stock will effective way of generating leads.

depend on the nature of your business. But

Too many businesses don’t allocate enough
regardless of the sector you’re operating in,
of their budget to marketing, and startups
make sure you shop around to get the best
that are strapped for cash often cut their
deal from suppliers.
marketing activities to try and save money.

Business startup costs in the UK:

what to consider 5
It’s important to remember, though, that your can claim as self-employed tax deductible

firm will struggle to attract customers unless expenses for all the details.

you make them aware of it. So you should think

It could be the cost of public transport (and if
carefully before cutting your marketing spend.
you’re saving the pennies, public transport can

be a great way of cutting costs) or it may be

Business insurance
buying a car or commercial van.

Most businesses will need insurance from the

If you’re buying a new vehicle, remember
day they begin operating. Without it, you’ll
to include all the associated costs in your
be risking hefty financial outlays if something
cashflow plan, such as road tax, insurance, loan
goes wrong. Business insurance doesn’t have
repayments, warranty and breakdown cover.
to be expensive, but it’s important to get the

right types of cover for your business. If you’re using your personal car for business

purposes, you should check whether your

The main ones to consider are public liability
current insurance covers business use. It often
insurance, professional indemnity insurance
makes more sense to switch to commercial
and employers’ liability insurance, but
vehicle insurance for flexible protection.
there are also many other insurance covers

which can protect things like your tools and

equipment and your premises.

Business travel
When starting a new business you may

need to travel regularly to sales meetings

or to client sites. So it’s important to factor

travel costs into your business expenses, and

remember to claim back any deductible costs

in your tax bill. Check our article on what you

Business startup costs in the UK:

what to consider 6
Further
reading
Here are 7 of the most common
new business mistakes - and how
to avoid them
Click here for more >

7 things to do to start a business

in the UK
Click here for more >

10 amazing UK small business

ideas for 2020
Click here for more >

Business startup costs in the UK:

what to consider 7