What is share capital? In short, share capital is the total amount of money that a limited company raises by issuing shares to its shareholders. It is one of the first things you set up when you register a company at Companies House, and it stays on record as part of your company’s financial structure. Whether you are starting out on your own or bringing in a business partner, understanding share capital helps you stay on top of your legal responsibilities from day one.
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What is Share Capital in Simple Terms?
Think of share capital as the foundation money of your company. When you set up a limited company, you divide the ownership of that company into units called shares. Each share has a value, and the total combined value of all those shares equals your share capital.
For example, if you issue 100 shares at £1 each, your share capital is £100. That is the most common setup for small UK limited companies, and it keeps things simple.
| Quick example: You register a company and issue 100 shares at £1 each. You own all 100 shares. Your share capital = £100. You are the sole shareholder and 100% owner of the company. |
The share capital figure is recorded in your company’s balance sheet under the heading ‘equity’ or ‘shareholders’ funds’. It also appears on your Companies House filing and in your company’s statement of capital.
How Does Share Capital Work in a UK Limited Company?
When you register a limited company in the UK, Companies House asks you to declare your share capital. This includes how many shares you are issuing, the nominal value of each share, and who owns them.
The nominal value is simply the face value of each share — the price you set when the company is formed. It has nothing to do with the market value of your business. Most small company owners set it at £1 per share for simplicity.
Who Owns the Shares in a Company?
The people who own shares are called shareholders or members. As a sole director running your own limited company, you will usually be the only shareholder. If you are going into business with someone else, you can split the shares between you in whatever proportion reflects ownership.
| Scenario | Share Split |
| Solo business owner | 1 person holds 100% of shares |
| Two equal partners | 50 shares each (50/50 split) |
| Majority and minority owner | e.g. 70 shares / 30 shares (70/30 split) |
| Family business | Shares split between family members |
Does Every UK Limited Company Need Share Capital?
Yes. Every private limited company (Ltd) in the UK must have at least one share and at least one shareholder. There is no minimum value set by law — you could technically have a share capital of just 1p — but in practice, most companies start with £1 per share.
If you run a limited liability partnership (LLP) or a sole trader business, the rules are different — share capital only applies to limited companies.
What Are the Different Types of Share Capital?
Share capital is not just one simple number. Accountants and company law use several terms to describe different aspects of it. Here is a plain-English breakdown of each type:
Authorised Share Capital
This is the maximum number of shares a company is allowed to issue, as set out in its founding documents. In the UK, companies formed after October 2009 no longer need to set a maximum limit. Most modern UK companies have unlimited authorised capital by default.
Issued Share Capital
This is the number of shares that have actually been given out to shareholders. If your company is allowed to issue up to 1,000 shares but you have only handed out 100 so far, your issued share capital is based on those 100 shares.
Called-Up Share Capital
Sometimes, a company issues shares but does not ask shareholders to pay for them straight away. The called-up share capital is the portion that the company has actually asked shareholders to pay. In most small UK limited companies, the full value is paid immediately, so called-up and issued share capital are the same thing.
Paid-Up Share Capital
This is the money that shareholders have already paid to the company. If all shareholders have paid for their shares in full, the paid-up share capital equals the called-up share capital.
| In plain language: For a typical small limited company in the UK, all four of these figures will usually be the same, because you issue shares and pay for them immediately when you set up the company. |
What Are the 4 Types of Capital in a Business?
Beyond share capital, businesses deal with four broader types of capital. These are worth understanding as they affect how your business is funded and how it grows.
1. Share Capital (Equity Capital)
Money raised by issuing shares to shareholders. It does not need to be repaid and gives shareholders an ownership stake in the business. This is what we have been discussing throughout this guide.
2. Debt Capital
Money borrowed by the business — for example, through a bank loan, overdraft, or business credit line. Unlike share capital, debt capital must be repaid with interest. It does not give the lender ownership in the company.
3. Working Capital
This is the money your business has available to cover its day-to-day running costs. It is calculated as your current assets (cash, stock, money owed to you) minus your current liabilities (bills, wages, short-term debts). Healthy working capital means your business can pay its bills without needing to borrow.
4. Trading Capital
This refers to the funds a business keeps specifically to trade or invest — most commonly seen in financial services, but it also applies to businesses that need a pool of money to buy and sell stock or assets regularly.
| Type of Capital | What It Means in Practice |
| Share Capital | Money put in by shareholders in exchange for ownership |
| Debt Capital | Money borrowed (e.g. bank loans) that must be repaid |
| Working Capital | Day-to-day funds available after paying current debts |
| Trading Capital | Funds set aside for buying/selling assets or stock |
What Does £100 Share Capital Mean?
If someone tells you their company has £100 share capital, it almost always means they registered with 100 shares at £1 each — and that is perfectly normal for a small UK limited company.
It does not mean the company is only worth £100. Share capital is not a measure of the value or profitability of a business. It is simply an administrative record of the initial ownership structure.
Here is why most UK contractors and small business owners choose £100 share capital:
- It is simple and cheap to set up
- It keeps accounting clean and easy
- It gives you flexibility — you can always issue more shares later
- It is the most widely accepted standard for UK limited companies
| Important: The share capital amount on Companies House is public information. Anyone can look up your company and see how its shares are structured. This is completely normal and nothing to worry about. |
What Is Share Capital for Dummies? A Step-by-Step Breakdown
If you are completely new to this, here is the simplest possible way to think about it.
Step 1 – Your Company Is Like a Pie
Imagine your company is a pie. You can cut that pie into slices. Each slice is a share. Whoever holds a slice owns that percentage of the company.
Step 2 – Each Slice Has a Price Tag
When you first set up the company, you put a nominal price on each slice. Most UK business owners set this at £1 per share. This price tag is the nominal value.
Step 3 – The Total Is Your Share Capital
Add up the value of all the slices you have handed out. That total is your share capital.
Step 4 – Companies House Keeps a Record
When you register your company, you must tell Companies House how many shares) you have issued and at what price. They keep this on public record. You can update it later if you issue more shares or change ownership.
| Real-world example: You start a graphic design company. You issue 100 shares at £1 each. You keep 70 shares and give 30 to a business partner. Your share capital is £100. You own 70%, and your partner owns 30%. It is that simple. |
How Do You Record Share Capital at Companies House?
When you register a limited company online at Companies House (via their web filing service or through a formation agent), you will be asked to fill in a ‘Statement of Capital’. Here is what you need to provide:
- The total number of shares being issued
- The currency (usually GBP)
- The nominal value of each share (e.g. £1)
- The total aggregate nominal value (e.g. £100 if you issue 100 shares at £1)
- The names of shareholders and how many shares each person holds
This information becomes part of your company’s public record. Every year when you file your Confirmation Statement (previously called the Annual Return), you must confirm or update your share capital information.
| Companies House tip: If you change your share structure — for example, issuing new shares or transferring shares to someone else — you must notify Companies House within the required deadlines. Failing to do so can lead to penalties and legal complications. |
Can You Change Your Share Capital After the Company Is Set Up?
Yes, you can. There are several ways to change your share capital once the company is registered:
Issuing New Shares
You can create and issue new shares to bring in an investor, reward an employee, or restructure ownership. This is done through a process called allotment of shares, and you must notify Companies House using Form SH01 within one month.
Transferring Shares
An existing shareholder can transfer (sell or gift) their shares to someone else. You will need to complete a stock transfer form and update the company’s register of members.
Subdividing or Consolidating Shares
You can split one share into multiple shares (subdivision) or merge multiple shares into one (consolidation). This is less common for small companies but can be useful for tax planning or investment purposes.
Reducing Share Capital
In certain circumstances, you can reduce your share capital — for example, to write off losses. This usually requires shareholder approval and may need a court order or a special resolution, depending on the method used.
| HMRC note: Changes in share ownership can trigger tax events — particularly Capital Gains Tax (CGT) or Stamp Duty. Always speak to a qualified accountant before making changes to your share structure. |
Does Share Capital Affect Your Tax?
Share capital itself is not taxed as income when a company is formed. However, there are a few areas where share capital and shares can have a tax impact:
Dividends
As a shareholder, you may receive dividends — a share of the company’s profits. Dividends are taxed differently from salary. For the 2024/25 tax year, the dividend allowance is £500. Any dividends above this are taxed at dividend tax rates, which are lower than income tax rates. This is why many director-shareholders pay themselves a combination of salary and dividends.
Capital Gains Tax on Share Transfers
If you sell or give away shares at a profit, Capital Gains Tax may apply. For example, if your shares are now worth more than you originally paid for them, HMRC will want to know about the gain. Business Asset Disposal Relief (previously Entrepreneurs’ Relief) may reduce your CGT rate to 10% on qualifying gains when you sell your company.
Stamp Duty on Share Transfers
When shares are transferred for money or money’s worth, Stamp Duty applies at a rate of 0.5% of the purchase price (rounded up to the nearest £5). This is payable by the buyer. Stamp Duty is not charged if shares are transferred as a gift with no payment involved.
Common Mistakes Business Owners Make with Share Capital
Here are a few things to watch out for, especially if you are new to running a limited company:
- Not filing share changes with Companies House on time
- Assuming the share capital value reflects what your business is worth, it does not
- Issuing shares without considering the tax consequences first
- Forgetting to update the company’s internal register of members when shares change hands
- Setting up an overly complex share structure for a simple one-person company
What is the Difference Between Share Capital and Share Premium?
This is a question that often comes up when a company grows or takes on investors.
Share capital is the nominal value of the shares — the face value you set when you registered the company, such as £1 per share.
Share premium is the extra amount paid above the nominal value. If your company is doing well and an investor buys a share for £50 when the nominal value is £1, the extra £49 is the share premium.
Both share capital and share premium are shown separately on the company’s balance sheet, and both are recorded at Companies House.
Do You Need an Accountant to Help with Share Capital?
For a simple one-person company with a straightforward structure, you may be able to handle this yourself. Companies House makes it fairly easy to set up and update your share information online.
However, if you are:
- Bringing in a new business partner or investor
- Thinking about restructuring your shares for tax efficiency
- Planning to sell part or all of your company
- Unsure whether a change in shares triggers a tax event
| Need help with your company’s share structure or annual filings?
At Limited Company Accountant, we work with UK business owners and self-employed professionals every day — helping them stay compliant with HMRC and Companies House without the confusion. Get in touch for a free initial consultation. |
Whether you’re just forming your company or already knee-deep in paperwork, our London-based accountants are ready to jump in. One quick call and we’ll figure out what you actually need.
The Bottom Line
Share capital does not have to be complicated. Here is a quick recap of everything we have covered:
- Share capital is the total value of shares issued by your limited company
- Most small UK companies start with 100 shares at £1 each, giving a share capital of £100
- It is recorded at Companies House and forms part of your company’s official structure
- There are four types: authorised, issued, called-up, and paid-up share capital
- Changes to share ownership can have tax consequences — always check with an accountant first
- £100 share capital does not mean your business is worth £100 — it is just an administrative figure
- Dividends, CGT, and Stamp Duty are the main tax areas connected to shares and share capital
If you are still unsure about any of this, or you want to make sure your company’s share structure is set up correctly from the start, we are here to help. Our team of specialist UK accountants understands the pressures that come with running your own business — and we make the numbers side of things as straightforward as possible.
