Set Up a Contractor Limited Company
If you’re moving into contracting, one of the first practical questions is what it actually costs to set up your own limited company. The reassuring news is that company formation itself is very affordable, and the ongoing costs are modest and predictable. At Form My Company, we believe in transparent pricing, so in this guide we break down exactly what goes into the cost of setting up and running a contractor limited company, from the one-off formation fee to the ongoing expenses like accountancy.
Because some costs depend on your circumstances and choices, this guide explains the cost structure clearly, and we recommend an accountant for a full picture of your ongoing outgoings.
The One-Off Cost: Company Formation
Setting up your personal service company (PSC) begins with incorporation, and this is a one-off cost. It has two parts: the statutory Companies House fee and the formation service you choose.
The Companies House digital incorporation fee is £100 as of February 2026. This is the fixed government charge to officially register your company, and it’s the same wherever you form your company.
On top of that, a formation agent like us charges a service fee, which varies by package depending on what’s included. A basic package covers the essentials, while more comprehensive packages bundle in extras contractors often need, such as a registered office address, a director’s service address, and mail handling. Our pricing is transparent, so you can always see which part is the Companies House fee and which is our service charge.
The Extras Contractors Often Need
Beyond the bare incorporation, most contractors benefit from a few additional services that add to the upfront cost but deliver real value:
- Registered office address. Every company needs a UK registered office, and using a professional address keeps your home address off the public register. Our packages can include a compliant Bolton BL1 address.
- Director’s service address. This keeps your personal address private while meeting Companies House requirements.
- Business bank account. Essential for keeping company finances separate. This is usually free to open, and we can introduce you to suitable banking partners.
These aren’t strictly mandatory in every case, but for contractors concerned with privacy and professionalism, they’re well worth factoring into your setup budget.
The Ongoing Costs of Running a Contractor Company
The bigger part of the cost picture is ongoing, not one-off. Running a limited company involves some predictable recurring expenses:
- Accountancy fees. This is usually the main ongoing cost. A contractor accountant typically charges a monthly fee to handle your accounts, payroll, Corporation Tax, VAT if applicable, and dividend administration. Most contractors consider this essential, and the cost is often outweighed by the tax efficiency and time saved.
- Confirmation statement fee. Every company must file an annual confirmation statement with Companies House. The digital fee for this is £50 as of February 2026.
- Registered office renewal. If you use a registered office service, this is typically an annual cost.
- Insurance. Many contracts require professional indemnity and public liability insurance, which is an ongoing premium.
- Other possible costs. Depending on your situation, you might have software subscriptions, pension contributions, and similar business expenses.
What About Tax?
Tax isn’t a “setup cost,” but it’s part of the financial picture worth understanding. Your company pays Corporation Tax on its profits, and you’ll have personal tax to account for on the income you draw as salary and dividends. These aren’t fees for setting up, but amounts you set aside from your earnings. Because rates, thresholds, and allowances change each tax year and depend on your circumstances, an accountant is the right person to help you budget for these accurately.
Is It Worth the Cost?
For contractors who work regularly and have outside-IR35 contracts, the costs of setting up and running a limited company are typically modest compared with the tax efficiency and higher take-home pay it can deliver. The main ongoing cost, accountancy, usually pays for itself through the savings and peace of mind it provides. For short-term or inside-IR35 work, where the tax advantages are reduced, an umbrella company (which rolls its cost into a margin) may be more economical. The right choice depends on your contracts and circumstances, which an accountant can help you weigh up.
Keeping Setup Costs Down
You can keep your initial outlay sensible without cutting corners. Choosing digital documents rather than printed copies where you don’t need them, selecting a package that bundles the services you actually require rather than buying each separately, and only adding extras relevant to your situation all help. Our team is happy to help you pick the most cost-effective package for contracting, so you’re not paying for things you don’t need.
How Form My Company Helps
We make the formation part of your costs clear and affordable. You get transparent pricing with the Companies House fee shown separately, expert handling of your incorporation, a professional UK registered office address to protect your privacy, identity verification support, and banking introductions. With your company set up efficiently, you can focus your budget on the things that grow your contracting business.
Set Up Your Contractor Company Today
Setting up a contractor limited company is more affordable than many people expect, with a modest one-off formation cost and predictable ongoing expenses. With Form My Company, getting set up is quick, transparent, and fully supported. Get started today, and pair your company with a good contractor accountant to keep your ongoing costs efficient.
Frequently Asked Questions
How much does it cost to set up a contractor limited company?
The main one-off cost is company formation, which includes the £100 Companies House fee plus a formation service fee that varies by package. Extras like a registered office address add modestly to the setup cost.
What is the Companies House fee to register a company?
The digital incorporation fee is £100 as of February 2026. This is the fixed statutory charge to register your company and is the same regardless of which formation agent you use.
What are the ongoing costs of running a contractor company?
The main ongoing cost is usually accountancy fees, plus the annual confirmation statement fee (£50 as of February 2026), registered office renewal if used, and insurance. Exact costs depend on your setup and choices.
Do I need an accountant, and how much does it cost?
An accountant isn’t legally required but is highly recommended for contractors. Fees vary by provider and services, typically charged monthly. The cost is often outweighed by the tax efficiency and time saved.
Is a business bank account an extra cost?
Business bank accounts are usually free to open, though some providers charge monthly fees depending on features. We can introduce you to suitable banking partners after your company is formed.
Is setting up a limited company worth the cost for contractors?
For regular, outside-IR35 contractors, the modest setup and running costs are typically outweighed by tax efficiency and higher take-home pay. For short-term or inside-IR35 work, an umbrella may be more economical.
How can I keep my setup costs low?
Choose digital documents, pick a package that bundles the services you actually need rather than buying separately, and only add relevant extras. We can help you select the most cost-effective package for contracting.
