Setting up a limited company in the UK: a guide for non-UK residents

If you are a non-UK resident or expat and want to spend some time living and working in the UK, contract work could be the way to achieve your goals. Contract work can offer many benefits such as flexible working hours, the potential for increased earnings and greater control over who you work with.

If you are thinking of becoming a contractor in the UK, our short guide will explain everything you need to know and how to get started. You could also download our FREE Ultimate Guide to Contracting which will outline all the benefits of contract work.

Please note – all the information written here is subject to change and it is highly recommended that you engage the counsel of an immigration lawyer before moving to the UK and beginning contract work.

How to set up a limited company in the UK

As a non-UK resident there are a few steps you need to follow which will allow you to set up your own limited company and work in the UK. Below is a brief outline of what’s required.

Ensure you have the correct visa to grant you access to the UK

There are three main types of visas that can grant you access to live and work the UK, if you are from a nation that is outside the EEA and Switzerland:

Tier 1 visa

You can apply for a Tier 1 (exceptional talent) visa if you work in a qualifying field or have been endorsed as a recognised leader (exceptional talent) or an emerging leader (exceptional promise).

There are other classes of Tier 1 visa including the Start-up visa and the Innovator visa. For more information about Tier 1 visas visit the government’s website.

Tier 2 visa

A Tier 2 visa is the most commonly applied for visa and you can apply for a Tier 2 visa if you have been offered a skilled job in the UK and you’re from outside the European Economic Area (EEA) and Switzerland.

Under the Tier 2 visa, you must be sponsored by a company who is also your employer, and be on the permanent payroll of that employer. You can do an additional 20 hours of paid work per week in the same profession at the same level as your full-time work – and you can do so as a contractor through your own limited company.

For more information about Tier 2 visas and how to apply visit the government’s website.

Tier 5 (Youth Mobility Scheme) visa

The Tier 5 visa is a type of temporary visa that is available for individuals aged 18 to 30, who want to live and work in the UK for up to 2 years, and are from specific countries. You can own and operate a limited company if you come to the UK on this visa, however this visa cannot be extended or renewed.

Apply for a National Insurance Number

Once in the UK, you’ll need to apply for a National Insurance Number as you are unable to register your company for PAYE tax and National Insurance Contributions (NICs) until you get one.

The application process is relatively straightforward, although it can take several weeks from start to finish. For more information about how to apply visit the government’s website.

Once you have applied you will receive a letter from the Department for Work and Pensions (DWP) asking you to come to a National Insurance Number (NIN) interview, although in some instances there is no interview and you simply receive your NIN in the post. If you attend an interview, you will be required to produce documents which prove your identity and right to be in the UK. You’ll also be asked why you need a National Insurance Number.

Your National Insurance Number will arrive in the post a couple of weeks later. It is possible to start work before your National Insurance Number arrives but you should give it to your employer (if applicable) once you have it.

Secure a personal UK address 

You will need to find a residential address in the UK as you will be unable to apply for the National Insurance Number or a personal bank account without it. This is also where your National Insurance Number will be sent.

Open a personal bank account

You will need to open a personal UK bank account to allow you to be paid when you start your contract work, even if you will be opening a business bank account to operate a limited company. Most high street banks offer a range of personal and business bank accounts depending on your needs. High street banks usually require proof of residence in the UK before they can set up your account, as do digital banks such as Monzo, N26 and Revolut.

Choose your company’s legal structure

Before you can begin contracting, you need to decide which business structure you would like to pursue.

If you are working inside IR35 you will need to operate through an umbrella company and you will pay tax similarly to permanent employees. If you are a non-UK resident this is only possible if you do not need sponsorship from an employer for your visa, as umbrella companies and recruitment agencies are not permitted to sponsor immigrants (as they are not the main employer). For more information about the benefits of working through an umbrella company take a look at Churchill Knight Umbrella’s website.

If you secure a contract role that is outside IR35 then you can benefit from using your own limited company, a limited liability partnership or operating as a sole trader.

Find out more about IR35 and how it affects contractors in the UK.

Private Limited Company

A limited company is preferred by many contractors as it is the most tax-efficient way to get paid – as long as you are not caught by IR35. As a limited company is considered a legal entity of its own, it removes your financial liability if, for whatever reason, the company faces financial difficulties or goes under.

A limited company requires a minimum of one director, a company secretary and a shareholder. This is ideal for someone who wants complete control of their business. There is no minimum capital required to set up a limited company meaning you can start earning immediately.

Limited Liability Partnership

Limited liability partnerships are particularly suited to accountants, architects, solicitors, surveyors, consultants and other fields of expertise where a partnership is preferred to a limited company.

A limited liability partnership must have at least two members who both have limited liability. The partnership will have the same registration and disclosure agreements and requirements as a limited company.

Public Limited Company

A public limited company has limited liability and offers shares to the general public. It is a lower risk option for growing and expanding the business as the money gained from selling shares can be used to invest in new projects. A company will usually operate for a number of years as a Private Limited Company before turning public and selling shares.

A public limited company is also more suitable for larger businesses as it requires a minimum share capital of £50,000 and a minimum of two directors as well as a company secretary.

Register a UK office address

When setting up your company, you’ll need to register a UK office address for your company. This must be located in the same country which your company is registered in. It can either be your personal address or the address of a business premises.

If you use an accountant such as Churchill Knight & Associates Ltd you will be able to use our registered address as your business address.

Register the business

You will need to register your limited company with Companies House following a process known as incorporation. You can register your company online for a small fee or enlist the help of a specialist contractor accountant who will take care of the whole process for you.

To register your business, you will need to send the following to Companies House:

• Company name
• Business address
• At least one director and a shareholder (this can be the same person)
• The SIC code for the industry your company operates in

Register for tax

You must register for Corporation Tax within 3 months of commencing business. You can register for Corporation Tax and PAYE as an employer at the same time as registering your company.

Before registering your company for tax, you will need your company’s 10-digit Unique Taxpayer Reference (UTR). This is posted to your registered business address once you have registered your business with Companies House.

To register with HMRC you will need:

• Your limited company’s registration number
• The date you commenced business (your company’s first accounting period will also start from this date)
• The date your annual accounts will be made up to

Please note – you will also be required to file a yearly personal tax return which will need to be sent to HMRC and Companies House.

Open a UK business bank account

To get paid via a limited company you will need to open a business bank account to ensure transactions are processed smoothly and without exorbitant fees.

To open a business bank account in the UK you’ll require two documents: proof of your business address, your company registration number and proof of identity (UK driver’s license or a passport) for all named company directors.

Churchill Knight will support you every step of the way

Churchill Knight & Associates Ltd has specialised in contractor accountancy since 1998, delivering an expert and reliable accounting service. We can support you every step of the way from setting up your limited company to ongoing tax support and advice. We offer a variety of limited company packages to suit different business needs and for every industry.

For more information about our packages, take a look at our website or give our friendly consultants a call on 01707 871622.

* Calculator for illustration purposes only and uses assumptions. Limited figures based on 52 weeks, expenses £50 per week, £9,100 salary and accountancy fees included. As of 1st April 2023, there is no longer a single rate of Corporation Tax. The calculator uses assumptions and estimates and is designed to be accurate by individual circumstances will vary. Umbrella figures based on 52 weeks, £15 per week margin and holiday pay paid out. For a more accurate calculation tailored to your requirements, please contact Churchill Knight today by calling 01707 871 622 or contact us here.