Starting a business in 2025 is an exciting opportunity—but it’s also a time of fast-changing regulations, digital systems, and financial pressure. From day one, your accounting setup can either support your success or leave you exposed to costly errors.
To help you stay ahead, we’ve created this clear, actionable checklist tailored specifically for startups in the UK. Whether you’re a freelancer, tech founder, or launching a product-based business, the following steps will help you build a solid foundation.
1. Choose the Right Legal Structure
The structure you choose—sole trader, partnership, or limited company—affects everything from tax to funding to liability.
- Sole trader: Quick to register and simpler to run, but with full personal liability.
- Limited company: Offers better protection and more tax efficiency but involves more admin.
Many entrepreneurs opt to register as limited companies for growth potential and credibility.
Limited companies in London turn to Fusion Accountants for expert guidance when setting up for long-term success.
2. Register with HMRC or Companies House
This step makes your business legal in the eyes of UK authorities—and enables you to operate within the tax system.
- Sole traders must register for Self Assessment with HMRC. It’s quick, free, and can be done online.
- Limited companies must register with Companies House. This involves:
- Naming your company (check name availability)
- Creating Articles of Association
- Issuing shares
- Appointing at least one director
- Providing a registered business address
You’ll also automatically be registered for Corporation Tax with HMRC. Once registered, you’ll receive a Unique Taxpayer Reference (UTR), which is used for all tax matters.
If you’re not sure how to complete this step, an accountant can guide you through it—and help avoid delays or rejected applications.
3. Open a Business Bank Account
Mixing business and personal finances is one of the most common mistakes startups make. It complicates tax reporting, obscures true business performance, and raises red flags in audits.
Opening a dedicated business account allows for:
- Accurate income and expense tracking
- Clean bank feeds for accounting software
- Easier loan and grant applications
- Simpler reconciliation and reporting
High-street banks (like Barclays or Lloyds) and newer fintechs (like Starling, Tide, or Monzo Business) offer tailored solutions. Many digital banks also provide real-time spending notifications, multi-user access, and direct integrations with tools like Xero or QuickBooks.
Compare fees, features, and app usability before choosing—especially if you’re handling high transaction volumes.
4. Select the Right Accounting Software
Cloud-based accounting platforms aren’t optional in 2025—they’re essential for startups that want to stay lean, accurate, and HMRC-compliant.
Your software should allow you to:
- Send and track professional invoices
- Automatically reconcile transactions with your bank
- Submit VAT returns via MTD (Making Tax Digital)
- Manage payroll, pensions, and employee expenses
- Generate reports for cash flow, profit and loss, and forecasting
Popular tools like Xero, QuickBooks, and FreeAgent each serve different niches:
- Xero excels in automation and add-ons for scaling
- QuickBooks offers intuitive dashboards and strong mobile functionality
- FreeAgent suits freelancers and small service providers
Don’t just pick the cheapest option—choose one that integrates with your bank, supports your industry, and grows with your business.
5. Understand VAT and Registration Thresholds
VAT is often misunderstood, and that misunderstanding can cost you.
Here’s what to know:
- Compulsory registration is triggered once your business turnover exceeds £85,000 in any rolling 12-month period—not just a calendar year.
- Voluntary registration is common among startups that purchase a lot of equipment or work with VAT-registered clients.
- Choosing the right scheme—Standard, Flat Rate, or Cash Accounting—affects how much you pay, when you pay it, and how you file returns.
The Flat Rate Scheme simplifies reporting, but you can’t reclaim VAT on most purchases. The Cash Accounting Scheme improves cash flow for those with slow-paying clients. Each has pros and cons depending on your sector and invoicing cycle.
Before registering, assess your margins, client types, and VAT-related expenses with a qualified advisor. One mistake here could limit your cash flow or result in unexpected liabilities.
6. Track Every Expense from Day One
From startup costs to everyday running expenses, precise tracking gives you the financial visibility you need to succeed.
Good expense habits mean:
- No missed tax deductions
- Fewer errors on Self Assessments or Corporation Tax returns
- A clearer picture of profitability
Set up categories (e.g., advertising, equipment, software, utilities) in your accounting software. Use receipt-scanning features to snap and log purchases on the go. If you drive for work, use mileage-tracking tools too.
The earlier you build a disciplined system, the less likely you’ll fall behind during busy periods.
7. Work With an Accountant Who Knows Startups
Your accountant is more than a bookkeeper—they’re a strategic partner.
With the right one, you’ll:
- Avoid compliance issues and fines
- Optimise your tax liabilities legally and ethically
- Get support navigating HMRC, VAT, payroll, and funding applications
- Receive timely insights into your business’s financial health
Look for accountants who:
- Specialise in startups or small businesses
- Are Xero or QuickBooks certified
- Offer fixed monthly packages with proactive advice
- Understand sector-specific challenges (e.g. tech, eCommerce, consulting)
A good accountant won’t just help you file on time—they’ll help you grow faster and smarter.
Bonus Tips for 2025 Success
- Open a tax savings account: Move 20–30% of income into this account each month so you’re ready for VAT, Income Tax, or Corporation Tax.
- Automate compliance: Use cloud calendars and accounting tools to remind you of filing dates—Confirmation Statement, Self Assessment, VAT returns, and more.
- Schedule quarterly reviews: Don’t wait until year-end to review your finances. Quarterly meetings with your accountant help spot trends and avoid surprises.
- Build a financial runway: Aim for at least 3–6 months of operating costs in reserves. This gives you breathing room during slow periods or economic shocks.
- Use cash flow forecasting tools: Even free tools can help predict if you’ll run into trouble months ahead.
Final Thoughts
Starting a business can feel overwhelming—but with a solid accounting foundation, you’ll avoid the most common mistakes and position your startup for sustainable growth.
Limited companies in London turn to Fusion Accountants for expert guidance —and so can you. Whether you’re just incorporating or need help scaling, their startup-focused services can save you time, money, and a whole lot of stress.
