Set Up Your Contractor Limited Company: The Complete 2026 Guide
From Companies House registration to your first invoice — do it right the first time.
The 7-step setup checklist
- 1
Register your company at Companies House
Choose a name, pick a registered office address, and appoint yourself as director — usually done online in under an hour.
- 2
Open a business bank account
Keep company money separate from your own from day one — most contractor accountants can point you to a fast-opening option.
- 3
Register for Corporation Tax and, if needed, VAT
Corporation Tax registration is required within 3 months of trading. VAT registration is compulsory once you're likely to exceed the threshold — and often worthwhile before that at typical contractor day rates.
- 4
Get your IR35 status checked for this contract
Status is assessed per engagement, not once for your whole career — get it confirmed before you start, not after.
- 5
Set up invoicing
Agree payment terms with your agency or client and get your first invoice template ready before day one.
- 6
Sort your insurance
Professional Indemnity and Public Liability are near-universal contract requirements; Employers' Liability if you ever take on staff.
- 7
Decide your salary and dividend approach
Most contractors take a low salary plus dividends — get this set up correctly from your first payment, not retrofitted later.
Mistakes that cost £3,000+ in year one
Getting your IR35 status wrong
Back taxes, interest, and penalties if HMRC disagrees with an incorrect outside-IR35 determination — often £3,000+ per contract.
Missing your first VAT deadline
Penalties start from the very first missed return, and interest accrues on anything paid late.
Under-claiming allowable expenses
Contractors who don't know what's claimable routinely leave £1,000+ a year in tax relief unclaimed.
No professional indemnity insurance in place on day one
Most agency contracts require proof of cover before you can start — sort it in week one, not after a client asks.
Join Confident Contractor
A practical 4-week live programme covering exactly this: company setup, compliance, cash flow, and the confidence to get it right the first time.
Price: £750 + VAT (£900 total)
“The open discussion nature of the live course allowed us to explore the topics.”
“I know where to look for my next contract. The structure made it easy to learn.”
“Started the new gig this week, going really well so far and feeling confident about all the business / Ltd company side of things too 🙌”
Common questions
How long does setup take?
Companies House registration itself is often same-day. Allow one to two weeks in total for a bank account, insurance, and VAT registration to all be in place.
Do I need an accountant from day one?
Not legally, but most contractors find it pays for itself — a contractor-specialist accountant keeps you compliant and usually saves more in tax efficiency than they cost.
What if I'm inside IR35 — do I still need a Ltd company?
Not necessarily for that engagement — see our umbrella vs limited company comparison to work out which makes sense for your situation.
Not ready to join yet? Ask a question
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