How to Start a Consulting Business in the UK

Consulting is one of the most popular routes into self-employment for experienced professionals. Whether you specialise in management, strategy, operations, or a technical discipline, turning your expertise into a consultancy can be highly rewarding — both financially and personally.

This guide covers the practical steps to get your consulting business started in the UK.

Do You Need Qualifications?

There are no mandatory qualifications to call yourself a consultant. Your credibility comes from your experience, expertise, and track record. However, in some specialisms — such as financial consulting, health and safety, or HR — clients may expect relevant professional qualifications or memberships.

Industry memberships and certifications can help build credibility:

• CMI (Chartered Management Institute)
• MCA (Management Consultancies Association)
• Relevant professional bodies for your specialism

Sole Trader or Limited Company?

This decision matters more for consultants than many other businesses, primarily because of IR35 (off-payroll working rules).

Sole Trader

Simple and low-cost. You register with HMRC, pay Income Tax and National Insurance on your profits, and file a Self Assessment return. Works well if you have multiple clients and clearly operate as a genuine business.

Limited Company

Most consultants who work through agencies or on long-term engagements with single clients operate through a limited company. This provides:

• Tax efficiency — paying yourself a small salary plus dividends can reduce your overall tax and NI burden
• Limited liability — your personal assets are protected
• Professional image — some clients prefer to contract with a limited company
• IR35 considerations — while IR35 can apply to limited company contractors, having a company structure is often expected

IR35 — The Key Issue

IR35 determines whether HMRC treats you as genuinely self-employed or effectively an employee for tax purposes. Since April 2021, for medium and large private sector clients, the client determines your IR35 status (not you).

If caught inside IR35, you pay tax and NI equivalent to an employee — eliminating the tax advantages of a limited company. Key factors HMRC considers include:

• Substitution — could you send someone else to do the work?
• Control — does the client dictate how, when, and where you work?
• Mutuality of obligation — is the client obliged to offer work, and are you obliged to accept it?

If you work with multiple clients, set your own hours, use your own equipment, and bear financial risk, you are more likely to be outside IR35.

Registering with HMRC

As a sole trader, register for Self Assessment within three months of starting. If you form a limited company, register for Corporation Tax within three months of starting to trade.

VAT registration is required when your turnover exceeds £90,000. Many consultants register voluntarily below this threshold if their clients are VAT-registered businesses (who can reclaim the VAT anyway). It also lets you reclaim VAT on your own expenses.

Insurance

• Professional indemnity insurance — essential. Covers you if a client suffers a loss due to your advice or services. Typical cover starts at £100,000–£250,000.
• Public liability insurance — if you visit client premises or hold events
• Cyber insurance — if you handle client data
• Directors' and officers' insurance — if you operate through a limited company

Professional indemnity insurance for a sole consultant typically costs £300–£800 per year.

Claimable Expenses

• Home office costs — flat rate (£6 per week) or a proportion of actual costs
• Travel and subsistence — travel to client sites, hotels, meals while working away
• Equipment — laptop, monitor, phone, printer
• Software — project management tools, CRM, accounting software, Microsoft 365 or Google Workspace
• Professional subscriptions and memberships
• Training and CPD — courses, conferences, books related to your consulting specialism
• Marketing — website, business cards, LinkedIn advertising, content creation
• Phone and broadband — the business proportion
• Professional indemnity insurance
• Accountancy fees
• Co-working space — if you use one regularly
• Client entertainment — limited: you cannot claim tax relief on client entertaining, but it is a legitimate business cost

Keep meticulous records. Accounted photographs receipts, matches them to transactions, and keeps everything categorised for your tax return.

Setting Your Rates

Consulting rates vary enormously by specialism and experience:

• Junior/mid-level consultants — £300–£600 per day
• Senior/specialist consultants — £600–£1,200 per day
• Executive/strategy consultants — £1,200–£2,500+ per day

When setting your rate, factor in:

• Non-billable time (marketing, admin, business development)
• Holiday and sick days (you do not get paid for these)
• Pension contributions
• Insurance and other overheads
• Tax (including employer's NI equivalent if inside IR35)

A common rule of thumb: multiply your desired annual salary by 1.5–2 to account for overheads, non-billable time, and tax, then divide by your expected billable days (typically 200–220 per year).

Industry-Specific Tax Considerations

Basis Period Alignment

From April 2024, all sole traders are taxed on profits arising in the tax year (6 April to 5 April). Align your record-keeping with the tax year.

Flat Rate VAT

If VAT-registered, the flat rate for management consultancy is 14%. Compare this with the standard scheme to see which saves you money.

Pension Contributions

As a self-employed consultant, pension contributions are one of the most effective ways to reduce your tax bill. Contributions to a personal pension receive tax relief at your marginal rate, up to the annual allowance.

Research and Development

If you develop innovative processes, methods, or tools as part of your consulting work, you may qualify for R&D tax relief (more relevant for limited companies).

Winning Your First Clients

• Your network — former employers, colleagues, and contacts are your most valuable source of initial work
• LinkedIn — essential for professional services. Post regularly and engage with your target market.
• Referrals — deliver great work and ask for referrals
• Industry events — conferences, networking groups, professional body events
• Content marketing — blog posts, white papers, and speaking engagements establish expertise
• Agencies and platforms — recruitment agencies and platforms can provide work while you build direct relationships

Bookkeeping Tips

• Separate business and personal finances — essential, especially for IR35 purposes
• Track billable vs non-billable time — understand your effective rate
• Invoice promptly and follow up — late payment is common in consulting
• Record all expenses immediately — do not let them pile up
• Set aside 25–30% of profits for tax (sole trader) or manage Corporation Tax reserves (limited company)
• Review your finances monthly — understand your profitability

Accounted connects to your bank and uses AI to categorise your transactions. It is built for UK professionals and handles everything from receipt capture to Self Assessment preparation.

Key Deadlines

• 31 January — Self Assessment tax return and payment (sole traders)
• 31 July — second payment on account
• Quarterly — VAT returns if registered
• 9 months after year end — Corporation Tax payment (limited companies)
• 12 months after year end — Corporation Tax return filing

Getting Started

Consulting is one of the most accessible ways to leverage professional experience into self-employment. The barriers to entry are low, the earning potential is high, and the flexibility is unmatched.

Ready to keep your consultancy finances in order? Sign up for Accounted and let Penny manage the bookkeeping while you focus on delivering value to your clients.