Does a teenager you know want to start a business? If they’ve come to you with an idea, they’re part of a massive trend that’s only accelerating. 61% of Gen Z in the UK are already earning from side hustles, and three-quarters want to start one.
From there, the sky is the limit, with teenagers now regularly running highly successful businesses alongside their education and social lives.
The challenge is often understanding how to encourage their ambition while also helping them make sensible decisions. It’s nothing you can’t master with some time, patience, and support.
This guide is for supportive adults who want to help a teenager pursue their business aspirations. It covers how to start a business as a teenager in the UK – the legal and financial sides, plus helpful resources to tap into.
Teenagers have a unique edge: time. Time to explore, experiment, and even to fail without significant repercussions. No mortgage, fewer responsibilities, and relatively little to lose.
By running their own venture, young people gain skills such as selling, negotiating, managing money, communicating with strangers, and handling professional challenges.
For teenagers who are unsure what they want to do, running a small business is one of the fastest ways to find out. They discover what energises them, what bores them, and what they’re willing to work at to succeed and find satisfaction.
Identifying a good idea starts with your teen’s existing passions or skills. Start by sitting down and discussing:
From there, look at what other young people are already doing. Popular options include:
A basic business plan provides structure without being exhaustive – nobody needs a formal 30-page document at this stage. Write down a few questions to provide some structure and identify gaps ahead of spending money. An initial business plan should cover:
Putting the proverbial pen to paper helps a teenager think everything through in detail. It also gives you, as a parent or guardian, a clearer idea of what kind of support they may need – whether that’s financial, practical, or just moral.
This is where parental or adult support is essential. There are decisions to make about structure, tax, contracts, and banking, and many of these steps require an adult’s involvement.
One of the first choices is whether to begin as a sole trader or form a limited company . Here’s an overview of both options.
Starting a business as a self-employed sole trader has no minimum age or formation costs.
If they earn more than £1,000 in a tax year, they’ll need to register with HMRC for Self Assessment. Below that threshold, the trading allowance means they usually won’t need to file a return. Here are the basics:
For most younger teenagers, being a sole trader is a natural starting point in business. Once they turn 16, forming a limited company becomes an option.
From the age of 16, a teenager can be the director of a limited company that they form themselves. This means that forming their own limited company and being a shareholder of it becomes an option.
A limited company is its own legal entity – separate from the person who set it up. This means that if the business runs into financial trouble, the shareholders’ liability is limited to the value of their shares – and if a director is also a shareholder, that protection extends to them too. However, directors can be held personally liable in certain circumstances – for example, if the company continues trading while insolvent.
Rather than keeping income directly as a sole trader would, the director-shareholder gets paid through the company, usually as a combination of salary and dividends .
The trade-off is more admin. For example, each year, a limited company must file and report:
If income is growing and a 16+ teenager wants more structure and protection, this can be a logical move.
A limited company also opens up options for how they pay themselves – such as a combination of salary and dividends – which can be more flexible as profits increase. A company registration agent can handle the setup and get everything registered with Companies House.
A director is the person legally responsible for managing a company and making decisions on its behalf. The full role and responsibilities apply regardless of age or experience. These include:
Missing these obligations carries real consequences. Late filings result in personal fines. In more serious cases, a court can disqualify a director for up to 15 years or, in the most extreme cases, even impose a custodial sentence (a prison sentence). And if the company trades while insolvent, directors can be held personally liable – meaning the company’s debts become their personal debts, payable from their own money and assets.
If the child is over 16 and can be a director themselves, a parent or guardian may choose to join as a second director to share the responsibilities of running the company.
This is useful for signing contracts, opening a business bank account, and other steps that generally require someone to be 18 or older.
Anyone considering this role should understand what it involves. A co-director carries the same statutory duties and legal responsibilities as any other director, including everything listed above. Both directors are equally accountable.
Starting a business also means understanding the rules around ownership, banking, and agreements. For teenagers, there may be extra restrictions, as banks, payment providers, and some contracts often require an adult to be involved.
Shares represent ownership of a company – if you own shares, you own a piece of it. There’s no minimum age to own shares, so even someone under 16 can normally be a shareholder (though this can pose its own challenges). The company just needs at least one director who meets the age requirement.
That said, parents may sometimes choose to hold the shares in the company on behalf of the minor through a trust. A trust is a legal arrangement in which a person or persons – the trustees – hold and manage an asset on behalf of another person – the beneficiary. In this case, the parent is the trustee and the child is the beneficiary.
A common type used here is a bare trust . This is the simplest type, in which the trustees hold the assets until the beneficiary is old enough to take ownership. Once the child turns 18, they would transfer the shares to them.
Because trusts involve legal responsibilities and tax implications, getting proper legal advice before setting one up is essential.
Until a teenager turns 18, the contracts they sign may not be legally binding. Minors can generally walk away from contracts that aren’t for “necessaries” (essential goods and services), which is why suppliers and platforms are often reluctant to deal with them directly.
For anything involving regular payments or long-term commitments, a parent or guardian may need to sign or co-sign.
Limited companies need a dedicated business bank account , and many banks require all directors and account signatories to be at least 18 years old.
If the parent or guardian is a co-director, they can sometimes open and operate the account for the company. It’s still worth speaking to the bank directly to confirm their specific policies and understand exactly what being an account signatory involves for you.
Some digital banks (Starling, Monzo, Revolut, etc.) may be more flexible on age requirements, though this varies, and you’ll need to read the T&Cs carefully.
VAT applies to businesses regardless of the owner’s age or their business structure – sole trader or limited company.
If your teenager’s business turnover reaches £90,000 in any rolling 12-month period, they’ll need to register for VAT with HMRC and start charging it on their sales. It’s also possible to register voluntarily before hitting that threshold, which can make sense if the business is spending heavily on materials or equipment, since it allows you to reclaim VAT on those costs.
Most teen businesses won’t be anywhere near the threshold early on, but it’s good to be aware of it. Keeping accurate sales records from the start makes it easy to track, and an accountant can flag when it becomes relevant.
Financial literacy is invaluable. Earning, spending, tracking, and making financial decisions are brilliant life skills for teens to learn.
Step in with guidance when something needs explaining or when a decision has potentially serious consequences, such as filing tax returns, paying tax owed, or making large payments to other businesses or services.
Knowing when to ask for help is a sign of good judgement for business leaders of all ages. As a parent or guardian, part of your role is recognising moments where professional advice is worth the investment:
A business shouldn’t overshadow education. Balance is key, and if a child is under 16, they’re legally required to be in full-time education in the UK.
That said, plenty of young entrepreneurs run successful ventures alongside school. The key is keeping the workload realistic:
Setbacks are a part of business, so it’s a good idea to be prepared for some of the more common sticking points:
There’s no single route into entrepreneurship, but the right support can make the journey easier. Books, programmes, and specialist guidance can all help young people turn ideas into action. Here’s an overview of what’s out there.
Business books for teens
Here are four popular business books for teens that all cover different ground:
There are many programmes designed to support young founders with training, mentoring, and, in some cases, funding:
Many schools, colleges, and universities also run their own enterprise initiatives – business plan competitions, mentoring from local business owners, startup grants, or dedicated enterprise teams.
It’s worth checking what’s available. Older teens might also find it useful to consider running a side hustle while at uni .
Supporting your teen’s entrepreneurial endeavours arms them with skills and confidence that extend beyond business.
As they bring energy and ideas, you provide structure and safety. Whether they start as a sole trader or register a company, these early experiences will set them up for success in future ventures.
When the time comes to register a company, Rapid Formations can take care of the company registration and Companies House paperwork so you can both focus on what matters.
No, not directly. If they’re operating as a sole trader, the income belongs to them and is reported on their own Self-Assessment return. Your personal tax position only becomes relevant if you receive income from the business yourself, for example, through dividends if you hold shares in their limited company, or if you’re paid a salary as a director. If you’re unsure, it’s worth speaking to an accountant to understand how the arrangement affects both of you.
If you do become a shareholder in your child’s business, be aware that you may need to disclose this to your own employer – many employment contracts require you to report outside directorships or shareholdings to HR.
It depends on the structure. A sole trader can simply stop trading or scale back, and they’d notify HMRC if they’re no longer self-employed. A limited company continues to exist regardless, with its filing and reporting obligations still in place, until it is shut down. Some young entrepreneurs keep their business running alongside their university studies, while others put it on hold or appoint someone else to manage it. Planning makes the transition much smoother.
Technically, yes, but employment law applies regardless of business size. If they’re paying someone regularly to do work, that person may be classified as an employee or worker, which brings obligations around minimum wage, tax, and potentially auto-enrolment pensions. Getting advice before hiring anyone, even informally, is a smart move.
That’s completely normal, and it shouldn’t be treated as a failure. Many successful entrepreneurs went through multiple ideas before finding the one that stuck. The skills they develop along the way – managing money, dealing with customers, problem-solving, managing time – are valuable regardless of whether the business itself continues. Encourage them to reflect on what they’ve learned and think about what they’d do differently next time.
Set clear boundaries together around how many hours per week go toward the business and when those hours happen. If they’re under 16, they’re legally required to be in full-time education. Keep an eye on grades, sleep, and stress levels. If any of those are suffering, something needs to change. Starting small and scaling gradually is always better than overcommitting from the outset.
Making Tax Digital for Income Tax is an HMRC initiative that requires sole traders to keep digital records and file quarterly updates using compatible software (such as QuickBooks Online or Xero). From April 2026, it applies to those with self-employed income over £50,000, and from April 2027, the threshold drops to £30,000. Most teen businesses won’t hit those thresholds early on, but it’s worth being aware of as income grows.
Yes. Some industries have age-related restrictions that go beyond general business rules. Financial services, for example, are heavily regulated – activities like currency trading, investment advice, or insurance broking require FCA authorisation and typically have minimum age requirements of 18 or older. Selling age-restricted products like alcohol, tobacco, or knives is also off limits. And certain types of work are restricted for under-18s on health and safety grounds, such as operating heavy machinery. It’s always worth checking whether the specific industry has its own rules before committing to an idea.