Comparisons for startups

On 2026/27 rates, a company that pays out all its profit as salary and dividends usually leaves its owner with slightly less than a sole trader earning the same profit. A company can save tax on profit kept in the business, which is taxed at corporation tax rates of 19% to 25%. For a startup, limited liability and the ability to raise investment, including through SEIS and EIS, are usually the bigger reasons to incorporate.

For a startup that plans to grow, hire, raise money or trade abroad, we recommend Xero. Buzz is a Xero Gold Partner, and Xero's UK plans start at £18 a month + VAT, paid to Xero. FreeAgent is included in our fee for simpler companies that will stay straightforward.

Choose an account you can open quickly and that sends transactions directly to your accounting software. Without a direct bank feed, every transaction has to be imported or typed in by hand.

You must register once your VAT taxable turnover for the last 12 months goes over £90,000, or if you expect it to go over £90,000 in the next 30 days alone. Below that, registering is optional. It usually helps if your customers are VAT-registered businesses, because they can reclaim the VAT you charge, and it usually costs you if you sell to consumers, who cannot reclaim it.