How Much Money Do You Need to Start a Business in London in 2024? All You Need to Know

London is a bustling city with numerous prospects for entrepreneurs. With its diversified population, flourishing financial industry, and innovative spirit, London has emerged as a preferred destination for ambitious individuals seeking to launch their own enterprises.

Starting a business in London in 2024 is both thrilling and tough. However, it is critical to have a thorough awareness of the financial needs.

In this article, we’ll look at the different prices and aspects to consider when starting a business in London in 2024. We will go over everything from Inventory to business registration, employing workers, and marketing your products or services.

Estimated Costs to Start a Business in London Depending on Industry

Depending on the industry, the expected costs to launch a business in London can differ significantly. For instance, the start-up costs of a restaurant or café might range from £5,000 to £10,000. These costs include rent, stock, equipment, and licences. On the other hand, a small technology start-up typically needs between £1,000 and £5,000 to get off the ground, with the majority of those funds going towards marketing and software development.

In London, the cost of starting a retail business can range from £2,000 to £20,000 or higher. Costs like rent, inventory, branding, and marketing are included in this. While the start up cost for setting up a fashion brands in London can range from £30,000 to £100,000, making it a costly venture. This covers expenses for things like hiring a designer, making samples, promoting, and building a website.

Important Business Expenses to Consider when Estimating your Start-up Costs

1. Equipments

When it comes to startup costs, how much money does one need for equipment? Point-of-sale systems, credit card terminals, and computers are among the more common devices used by businesses. You will also need to purchase desks, chairs, coffee makers, and other items because most offices are rented empty.

While these expenses are not one-time purchases, you should budget between £300 and £2,000 in London.

2. Business Registration

It’s very easy to register a business in the UK with Companies House or through another third party. Nevertheless, you will have to choose whether to register as a sole trader, form a partnership, or form a “Limited Company.”

There are benefits and drawbacks to each approach for creating company enterprises. Limited Liability (Ltd.) businesses, for example, protect your personal assets in the event that the company fails. The disadvantage is that filing company finance reports is subject to far tighter rules.

The cost of registering with Companies House is £71 for paper registration or £50 for online registration.

You can register your business here –

Even if you may register a UK company on your own via the internet, hiring a professional accountant is a wise move since they can assist you in choosing the best company model and in preparing the necessary documentation. These factors make the start-up cost for registering a UK corporation somewhere from £50 and £100 or more.

3. Inventory

It makes sense that stock needs to be stored in bulk when starting a retail business. To manufacture things, you’ll also need access to raw materials to start. It might be difficult to strike a balance because the potential revenue increases with the amount of goods you lay in. However, if a product doesn’t sell, your money might be invested in useless products.

You can be tempted to overlook inventory if you’re just starting a creative business like copywriting, graphic design, or video creation because your items are digital. However, if you’re creating digital content, you should think about backing up and storing your work. Since all of the abovementioned are expensive, inventory is an important part of the start up business cost for businesses.

Inventory could range from £500 to £1,000 or more depending on your business venture.

4. Marketing

Startup marketing is the term used to describe the collection of approaches, employed to market your goods and services, expand your customer base, and forge a strong brand identity. As a startup, your marketing strategy has to be extremely inventive, flexible, and economical because of your resources.

In the modern startup world, it is almost difficult to operate without a digital marketing plan. The majority of customers spend a large portion of their time online these days, and more and more commercial transactions happen online as well. Your business can lose out on a sizable chunk of the market and potential clients if you fail to invest in digital marketing.

Digital marketing channels like email marketing, content marketing, and social media can be very inexpensive yet very powerful means of connecting with consumers, creating a brand community, and generating leads and sales. Additionally, SEO (Search Engine Optimisation) can assist new businesses in increasing their online presence and bringing in more natural traffic to their website. As a result, a startup’s marketing budget should range from $2,000 to $5,000 per month.

How to Spend your Marketing Budget?

1. Website Development and SEO

Building a well-thought-out and easily navigable website is the cornerstone of a successful online presence. The cost includes domain registration, hosting, website development, design, and SEO. You will require a substantial investment because SEO will require continuous effort. A minimum of $500 to $700 should be set aside each month for site development and SEO.

2. Content Creation & Content Marketing:

One of the main components of startup marketing is creating content and marketing. In the digital world, high-quality contents are paramount, therefore you’ll need to set aside enough money for articles and blog entries. A minimum of $500 to $600 is required for both content marketing and content creation. If you want to develop your startup, make sure you are investing in content marketing.

3. Social Media Marketing

Social media marketing is crucial for promoting brands and new businesses. Money must be set aside for engagement strategies, and paid advertising. If your business is B2C, you should budget $800–$2,000 for social media marketing; if it’s B2B, you should budget $400–$500.

4. Email Marketing

Email marketing can sometimes be a very effective tool for promoting startups. Building and maintaining a subscriber list is a cheap way to communicate with potential customers. Allocate funds for email marketing tools, automation software, and unique content creation for email campaigns. For email marketing and email list building, you should set around $500 to $1,000.

5. Word of mouth and fliers

Word-of-mouth advertising is among the least expensive kind of promotion. The success of this kind of marketing depends on customers telling their friends, family, and coworkers about your company. Given that suggestions from reliable sources usually outperforms traditional advertising, it has the potential to be very potent. But it takes time and commitment to establish a solid network and get people talking about your company.

6. Insurance

Your private assets are often protected from being taken to satisfy business debts if you have established a Limited Liability corporation. Even so, insurance might provide you with some comfort in the event of an emergency. In the event that your business engages in public operations or poses a significant risk, such as construction, you must obtain Public Liability Insurance.

This safeguards your business in the event that someone claims they were hurt on your property or that they misplaced expensive belongings. For UK startups, the typical  expenditure is between £3.67 per month and £40 per year

Also, it can cost as low as £80 a year, or £6.67 a month, for a small  business with a couple of employees to purchase employers liability insurance

7. Workspace

Choosing a workspace might be one of your biggest expenses, regardless of whether you’re a one-person business or trying to create a multinational enterprise. Work from home policies are becoming more and more common for companies thanks to the growth of remote work and hybrid work models. You can practically do away with workspace expenses if you can accomplish this.

However, depending on the location and size of the property, the cost of renting office space in London might vary significantly. London office rents range from over £145 per square foot for Grade A offices in upscale neighbourhoods like St. James’s and Mayfair to as low as £20–30 per square foot for Grade B spaces in less central locations. For companies on a tight budget, coworking spaces and serviced offices are an excellent choice because they provide more flexible conditions.

It is important to understand that there are several variables that affect the pricing of a serviced office, such as the office’s size and location. Larger offices typically have higher costs because they may come with additional facilities and private conference spaces. The average cost per desk in the City of London is £655 for offices with five to ten employees and £800 for private offices with fifty or more. This means that a  startup’s  workspace cost in London might range from £0 to £10,000 annually.

8. Hiring Employees

Salaries in London can be very high, particularly for specialised professions. In London, the average annual salary is about £40,000.

A start up could have a number of employees which includes the Salesperson, Financial Officer, Office Manager, Customer Service Representative, Content Writer etc

Your employees must receive the minimum wage, which is £11.44 per hour for those over 21, at the absolute least.

By the end of the month, depending on the number of staff you have, the salary expense could rope up to £40,000 - £500,000 or more.

9. Professional Fees

To help with the establishment of your company, you might need to contact experts like business consultants, accountants or lawyers. Depending on the intricacy of your company’s requirements, the cost of these services may vary from a few hundred to several thousand pounds.

10 Taxes in London

Understanding what business tax to pay and when to pay is essential for both limited corporations and sole proprietors.

Which business taxes do you need to pay?

Which business taxes you must pay depends on several criteria, such as:

1. How your business is set up
2. How much profit you generate; and
3. How you pay yourself as an owner (via dividends, salary, or business withdrawals).

This implies that you won’t have to pay for each and every one. Having a comprehensive understanding of business taxes in London can be beneficial for structuring and managing your company

The main business taxes to be aware of includes:

1. Corporation tax
2. Income tax
3. National Insurance
4. VAT
5. Dividends tax
6. Capital gains tax

Corporation tax

You have to pay corporation tax if your company is set up as a limited company. Every year, this tax is paid based on the profits your company produces in the financial year.

The following are the corporation tax rates for the 2024–2025 tax year:

• Profits under £50,000 are subject to a 19% small profits rate.
• Profits over £250,000 are subject to a 25% main rate levy.

Income tax

If you operate as a sole proprietor, you must use your self-assessment tax return to pay your income tax. This needs to be filed and paid by January 31st, the latest, after the end of the most recent tax year.

• The rate for £12571–£50270 is 20%
• The rate for £50,271–£125140, 40%

National Insurance

If you are a sole trader and your income exceeds 12,570, you will have to pay Class 4 NICs.

• The rate of Class 4 NICs is 6% of profits in the range of £12,570 and £50,270
• On profits above £50,270, however, the rate is 2%.

These payments are made through your self-assessment tax return.

VAT

Value added tax, or VAT, is usually imposed at a rate of 20% and is added to the majority of goods and services that a business that is registered for VAT would sell. Only businesses that have registered for VAT are able to charge VAT.

Dividends tax

If, as a business owner, you pay yourself a dividend and the amount exceeds the 2024–25 dividend allowed, you will have to pay tax on the difference.

Capital gains tax

When you sell an asset, such as shares in a company, you have to pay capital gains tax on the profit you make.

• Unexpected costs

Whatever the case, unexpected costs are bound to arise for every business eventually. Maintain a budget to help you get out of a tight spot in case of an emergency. Your illness, the need to quickly employ a specialist to handle an issue, or, if you’re at a physical store, an issue with the structure could result in unexpected expenses.

Business Licenses and Permits

What is a Business Licence?

A business licence or permit is a “pass” that enables an entity to carry out particular commercial operations. With the permission of the regional or national government, the licence will allow the business to operate lawfully. For instance, in order to lawfully sell alcohol on their land, a restaurant or bar must get a premises licence.

To manage the alcohol sales on the property, they will additionally require the presence of a minimum of one personal licensee. But not every company needs a licence.

If the business is legally operating and registered with the government, you may be able to trade without one in certain circumstances. Financial services, alcohol, and environmental effects are a few examples of highly regulated businesses that usually require business permits.

Ensuring the health and safety of service users is the primary objective of all municipal business licences. Additionally, it guarantees stability for clients and business owners. The guidelines and policies for every licenced business are provided by the business licencing by-law and other by-laws.

Some of the most common types of licenses or permits are:

• Childcare
• Sale of alcohol
• Gambling services
• Financial services
• Taxi companies
• Personal training services
• Playing music, even if in the background
• TV licence
• Security services
• HGV services or haulage companies
• Importing and exporting goods
• The serving, preparation, or storage of food
• Tattoo and ear-piercing services
• Manufacturing
• Any industries that impact the environment, such as factories

Licensing fees

Depending on the kind of business and the particular borough, business licence prices in London might differ significantly. A licence typically costs roughly £100 at the very least, with a maximum of £3,000 or more. It’s important to remember that, depending on the kind of business, the price of additional licences, like those for alcohol or food hygiene, may be much higher. As a result, it’s critical to learn about the particular criteria and costs associated with your business and area.

Tips for Cost Optimization

1. Consider Coworking Spaces:

These places provide small and beginning enterprises with reasonably priced solutions. For a much lower price than traditional office spaces, these shared office spaces usually provide amenities like Wi-Fi, printers, conference rooms, and reception services.

2. Tap into Free Resources:

Make use of London’s free networks and services, including business accelerators, incubators, and networking events. Without spending a fortune, these can assist you in making connections with investors, mentors, and new clients.

3. Focus on Necessities:

Prioritise investing in the essentials, including your website, accountancy and legal services, and marketing campaigns. These will assist in establishing the reputation and presence of your company in the marketplace.

Incorporate Your Company with Incorpuk Today

At Incorpuk, we will help you file accurate information when you register your company through us. We will help you with incorporation articles, a registered office address, and all you may need to register your company in the UK. Contact our team if you seek any information; we will gladly assist.

Conclusion

The cost of launching a business in London can range between a few thousand pounds to hundreds of thousands of pounds, depending on the industry and location. But don’t be intimidated by these statistics! With the correct strategy and assistance, you can convert your entrepreneurial dream into a successful business.

If you need expert advice on launching a business in London, consider working with us. Incorpuk provides a comprehensive suite of consulting services to help entrepreneurs like you navigate the challenges of starting a business in London.