The Cost of Owning a Business in London

February 24, 2025

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An international hub home to Fortune 500 companies, pioneering startups, and finance giants, London is often seen as the perfect place to launch an ambitious venture.

After all, its lively and dynamic environment seems to have paved the way for all these possibilities. With a beautiful skyline dotted with notable architecture and some of the world’s most famous attractions and restaurants, it’s a fantastic city to set up shop.

But when it’s time to knuckle down, you might soon realize that all of this comes at a cost. Suddenly, that daydream might start to feel like a fleeting dream.

Table of Contents

What to consider when starting a business in London?

what-to-consider-when-starting-a-business-in-london According to Mercer, London ranks eighth among the most expensive places to live, which naturally means the cost of doing business isn’t far behind. With such high living expenses, aspects like commercial rent and employee wages will be challenging for businesses to navigate.

For this reason, many companies, especially ones that operate online such as casinos that offer slot games with best payout rates, choose to set up their headquarters in other cities.

So, below are factors you should consider!

Renting Real Estate

Whether you’re a brick-and-mortar store or require office space in the city, renting office real estate in London is no joke. In fact, the city has set the all-time world record for office rent with Mercury’s 30 Berkeley Square in Mayfair, at £277.50 per square foot. While we’re looking at the very end of the spectrum here, the RE/MAX 2024 Commercial Real Estate Report states that industrial space alone rents out for around $10 (£7.95) to $12 (£9.54) per square foot, a type of space typically more affordable than office and store spaces.

Of course, real estate prices will also vary depending on the area in which you plan to operate. For example, choosing Canary Wharf and Soho will drive up prices, while areas in North London will have larger spaces at much more affordable prices.

Hiring Costs

hiring-costs-for-business-in-london If you plan to hire locally in London, note that full-time employees will have different expectations than contractors or freelancers. A freelancer usually only expects a salary by the hour or per project. At the same time, a full-time employee will legally require Statutory Sick Pay, pension contributions, and other employment rights and protections—all of which will cost you.

The London Living Wage as of October 2024 is £13.85 per hour, which you’ll have to abide by for all your employees (except those who are self-employed). Depending on your sector and the qualifications you’re seeking, more experienced workers will require a much higher standard of pay. For instance, the average base pay among software engineers across all years of experience is £58,000 per year, according to Glassdoor.

Taxes and Other Fees

The corporation tax you pay will vary based on the profit you make each year. Companies that make a profit of £50,000 or less must pay the 19% ‘small profits rate’, whereas companies that make over £250,000 profit must pay the main 25% rate. Anything in between, and you could be entitled to what’s called Marginal Relief. These percentages are by no means small, and you’ll have to factor these into your accounting. If your business were to make £48,000 a year, you’d have to pay £9,120 in corporate taxes alone.

Not only that, but there are also other incorporation and licensing fees involved in establishing yourself as a legitimate business. While these fees aren’t enormous, they still need to be considered. Especially if you’re a larger corporation or one that’s expected to scale, you’ll need a separate business bank account to keep your business and personal finances apart.

Logistics and Operations

logistics-and-operations-for-business-in-london Even once your business has an office space, employees, and all its financials in place, the expenses aren’t over yet. Businesses might need parking spaces, transport costs, IT infrastructure, high-speed internet, legal and accounting services, and may want to offer insurance premiums to their employees. All these extras cost money.

Parking spaces can be priced per hour, by day, by month, or you can even purchase one outright if that’s more convenient. The issue is that parking spaces can cost £30,000 to £100,000. The same goes for fully managed IT solutions, which can cost hundreds or thousands of pounds a month, depending on the size of your company. And, of course, lawyers and accountants have never been cheap, but they are often required for businesses to stay compliant and keep their books accurate and up to date.

Marketing and Advertising

Although social media ads and other similar online methods might not cost more or less than other big cities around the world, using traditional advertising or hiring a marketing agency to do the work for you will certainly come at a price.

London is well known to have some of the world’s top marketing and PR agencies, which means if you want the best of the best, you’ll need to have the funds for it. Retail, hospitality, real estate, and financial services companies are all examples of companies that classically invest in marketing and advertising, as the results are often worth the expenditure.

More Considerations Before Jumping In

Before you become blinded by the idea of owning a business in London, ask yourself, ‘Why London?’ If you’re based in the UK already, the prospect of moving to London makes sense because of the proximity and international exposure. However, those living elsewhere with the opportunity to select other locations may want to consider factors like competition, business relevancy, cost, and accessibility. While London is a fantastic city full of possibilities, it also comes with high expenses, intense competition, and a busy environment.

Author Profile

Fernando Raymond: CEO - ClickDo™ & SeekaHost™ | Started as an SEO Consultant and helped over 400 UK business owners grow their business with online marketing and Google advertising. More details about Fernando Raymond are available at www.fernandoraymond.com.