Starting a Business as a Minor (UK)

Starting a Business as a Minor (UK)

Yes, you absolutely can start a business under the age of 18 in the UK. Thousands of young people do it every year. But there are some important legal rules you need to understand — not to put you off, but to make sure you do it properly and protect yourself.

This guide covers the three main business structures, age restrictions, how contracts work when you are a minor, tax rules, and what having a "responsible adult" involved actually means.

Can Under-18s Legally Run a Business?

Short answer: yes. There is no minimum age to start earning money from a business in the UK. Children as young as 10 or 11 regularly sell crafts, baked goods, and digital products.

However, there are restrictions on certain things you can and cannot do until you turn 18:

• You cannot become a company director (under the Companies Act 2006, directors must be 16+)
• You cannot sign most legally binding contracts (more on this below)
• You cannot open a business bank account in your own name (most banks require you to be 18; some allow 16+ with parental consent)
• You cannot register for VAT in your own name if under 18 (but this only matters if your turnover exceeds £90,000 per year, which is unlikely when starting out)
• You can register as self-employed with HMRC
• You can trade as a sole trader
• You can earn money and keep profits
• You can pay tax (yes, even under-18s have tax obligations if they earn enough)

The Three Business Structures

When you start a business, you need to decide how it is legally organised. For young entrepreneurs, there are three realistic options.

#### 1. Sole Trader (The Most Common for Under-18s)

A sole trader is the simplest business structure. You are the business — there is no legal separation between you and your enterprise.

How it works:

• You register with HMRC as self-employed (free, done online)
• You keep records of your income and expenses
• You file a Self Assessment tax return each year (by 31 January)
• You pay Income Tax on profits above £12,570 (the Personal Allowance for 2025/26)
• You pay National Insurance if profits exceed £12,570

Age requirement: There is no minimum age to be a sole trader. A 13-year-old selling cakes at a market is technically a sole trader. However, HMRC recommends that anyone under 16 has a parent or guardian help them register and manage their tax obligations.

Pros:

• Free and easy to set up
• You keep all profits
• Simple record-keeping
• No minimum age

Cons:

• You are personally responsible for all business debts (this is called "unlimited liability")
• Less professional image than a limited company
• Your personal and business finances are mixed

Best for: Most young entrepreneurs starting out. This is where nearly all teen businesses begin.

#### 2. Partnership

A partnership is when two or more people run a business together. Each partner shares the profits, losses, and responsibilities.

How it works:

• All partners register with HMRC as self-employed
• Each partner files their own Self Assessment tax return
• Profits are shared according to your partnership agreement
• Each partner pays tax on their share of the profits

Age requirement: There is no minimum age to be a partner in an ordinary partnership. However, since partners can be liable for each other's debts, having a parent or teacher involved is strongly recommended.

Important: Always create a written partnership agreement, even if your partner is your best mate. It should cover:

• How profits are split
• What happens if one partner wants to leave
• Who is responsible for what
• How decisions are made
• What happens if you disagree

Pros:

• Shared workload and skills
• More people to brainstorm with
• Easy to set up

Cons:

• You are liable for your partner's business debts
• Profits are shared
• Disagreements can destroy friendships AND the business
• Still unlimited liability

Best for: Two friends with complementary skills who want to build something together.

#### 3. Limited Company

A limited company is a separate legal entity from its owners. It has its own identity, its own bank account, and its own tax obligations.

How it works:

• You register with Companies House (costs £12 online)
• The company has directors (who run it) and shareholders (who own it)
• The company pays Corporation Tax on profits (currently 19-25%)
• Directors and shareholders can pay themselves through salary and dividends

Age requirement: You must be at least 16 to be a company director. There is no minimum age to be a shareholder. This means a 14-year-old could own shares in a company, but someone 16 or older (or a parent) would need to be the director.

Pros:

• Limited liability — if the business owes money, your personal savings are protected
• Looks more professional
• Can be easier to attract investment

Cons:

• More paperwork (annual accounts, confirmation statement)
• More expensive to run (accountant fees, filing fees)
• More complex tax obligations
• Director must be 16+

Best for: Businesses that are scaling up, taking on significant financial risk, or want to attract outside investment. Most teen entrepreneurs do not need this until their business is well-established.

Which Structure Should You Choose?

For the vast majority of young entrepreneurs, sole trader is the right choice. It is free, simple, and you can always convert to a limited company later if your business grows.

Consider a limited company only if:

• You are 16+ and your annual profits exceed a few thousand pounds
• You are taking on financial risks (buying large amounts of stock, signing contracts)
• A parent or teacher is willing to help with the extra paperwork

Contracts and Minors — What You Need to Know

This is one of the most important legal topics for young business owners. In the UK, the law treats contracts with minors differently from contracts between adults.

The basic rule: Contracts with minors (under 18) are generally voidable — meaning the minor can walk away from the contract, but the other party usually cannot force the minor to fulfil it.

There are exceptions — contracts that ARE binding on minors:

• Contracts for necessaries — things essential for living (food, clothing, education-related items). If you order supplies that are reasonable and necessary for your business, this might count.
• Contracts for employment, apprenticeship, or training — if the contract is substantially for your benefit.

What this means in practice:

• If you sign a contract with a supplier and then change your mind, you might be able to cancel it. But this does not mean you should sign contracts carelessly.
• Most serious suppliers will want a parent or guardian to co-sign any contracts with under-18s.
• Online terms and conditions (like agreeing to a website's terms of service) are technically contracts. Most platforms handle this by requiring users to be 13+ or 18+ and asking parents to agree on behalf of younger users.

Practical advice:

• Always read what you are signing — or ask a parent to read it
• Get a parent to co-sign any significant contracts
• Keep copies of everything
• If you are unsure, ask your teacher or a parent before committing

The "Responsible Adult" — What It Actually Means

You will hear this phrase a lot as a young business owner. Here is what it means:

A responsible adult is a parent, guardian, or trusted adult (like a teacher) who:

• Oversees your business activity — they know what you are doing, how much money is involved, and who you are dealing with
• Co-signs contracts and agreements — because you cannot enter into legally binding contracts alone
• Manages financial accounts — opens bank accounts, payment platform accounts, or marketplace accounts on your behalf
• Takes legal responsibility — if something goes wrong (a debt, a complaint, a legal issue), the responsible adult may be held accountable

This is not about control — it is about protection. The law recognises that under-18s are still developing their judgement, and having an adult involved provides a safety net.

On Futurepreneurs, your teacher/mentor plays this role for your crowdfunding campaign, and your parent provides consent and oversight. This is exactly the kind of responsible adult arrangement the law envisions.

Tax Basics for Young Entrepreneurs

Even if you are 12 years old, if you earn money from a business, HMRC wants to know about it. Here is the good news: you probably will not owe any tax.

#### The Personal Allowance

Every person in the UK — regardless of age — has a tax-free Personal Allowance. For the 2025/26 tax year, this is £12,570. You only pay Income Tax on profits above this amount.

So if your candle business makes a profit of £2,000 in a year, you owe zero Income Tax.

#### When to Register with HMRC

You should register as self-employed with HMRC if:

• You earn more than £1,000 from self-employment in a tax year (this is the "trading allowance")
• You want to voluntarily pay National Insurance to build up your future State Pension entitlement

If your business earns less than £1,000 profit in a tax year, you do not need to register or file a tax return (thanks to the trading allowance). But if you are getting close to £1,000, register to be safe.

#### How to Register

• Go to gov.uk and search for "register as self-employed"
• You will need your National Insurance number (you get one automatically shortly before your 16th birthday, or you can apply for one)
• If you are under 16 and do not have a National Insurance number yet, a parent can call the HMRC Self Assessment helpline to register on your behalf
• You will need to file a Self Assessment tax return by 31 January each year

#### Record-Keeping

HMRC requires you to keep records of:

• All income (every sale, every payment received)
• All business expenses (supplies, postage, packaging, website costs)
• Receipts and invoices

A simple spreadsheet is fine. You do not need accounting software when starting out. Keep records for at least 5 years.

#### Expenses You Can Claim

Business expenses reduce your taxable profit. Common ones for teen entrepreneurs:

• Raw materials and ingredients
• Packaging and postage (Royal Mail, Evri, etc.)
• Website costs (domain name, hosting, Shopify subscription)
• Printing costs (flyers, business cards)
• Market stall fees
• Travel to suppliers or events (bus/train fares)
• Tools and equipment used for the business

You cannot claim: everyday clothing (even if you wear it at your market stall), food you eat yourself, or personal phone bills (unless you can clearly separate business and personal use).

National Insurance

• Under 16: You do not pay National Insurance, even if you earn above the threshold
• 16-17: You pay Class 2 and Class 4 National Insurance if your profits exceed £12,570. Class 2 is £3.45/week; Class 4 is 6% of profits between £12,570 and £50,270

VAT — Probably Not Relevant Yet

You only need to register for VAT if your turnover (total sales, not profit) exceeds £90,000 in a 12-month period. This is extremely unlikely for a new teen business. If you get anywhere near this, congratulations — and get an accountant.

Employment Law and Hiring Friends

If your business grows and you want to pay friends to help:

• Under 13: Cannot be employed at all (with very limited exceptions like acting/modelling)
• 13-16: Can work limited hours with restrictions (max 12 hours/week during term time, max 25 hours/week during holidays for 13-14, max 35 hours for 15-16)
• You need employer's liability insurance if you employ anyone
• You must pay at least the National Minimum Wage for their age group

Simpler alternative: Instead of employing friends, consider paying them as freelancers for specific tasks. They would be self-employed and responsible for their own tax. But be careful — HMRC has strict rules about what counts as employment vs. self-employment.

Insurance

Most teen businesses do not need insurance immediately, but consider it if:

• You sell food products (product liability insurance)
• You attend markets or events (public liability insurance, often required by the event organiser)
• You have expensive equipment
• You are providing a service where something could go wrong (e.g., dog walking)

Basic public liability insurance for a small business starts at around £40-60/year.

Key Takeaways

• You can absolutely start a business under 18 in the UK — sole trader is the simplest route
• A responsible adult should be involved — not to control you, but to protect you legally and financially
• Keep records from day one — even if you do not owe tax, good habits start early
• The trading allowance (£1,000) means very small businesses do not need to register with HMRC at all
• Contracts are tricky — always involve a parent when signing anything significant
• Start as a sole trader, upgrade later — do not overcomplicate things at the beginning
• Getting it right builds trust — backers, teachers, and parents all feel more confident supporting a business that plays by the rules