The order things have to happen in
Not the order they are usually done in, which is why this page exists.
1. HMRC anti-money-laundering registration. Before any activity. Trading as an estate agency business without being registered, or after registration is cancelled, is a criminal offence, and failure to apply at the required time is the breach HMRC publishes more than any other. Allow time: this is an application with an approval process attached, not a form that completes on submission.
2. Redress scheme membership. From the moment you engage in the work. The Property Ombudsman or The Property Redress Scheme, covering estate agency work under the 2008 Order and lettings and property management under SI 2014/2359.
3. Client money arrangements, before any money arrives. For lettings: an approved CMP scheme, and the client account, written procedures and PII its approval conditions require. For sales: a client account whose title contains the word “client”, held with an authorised institution, and a records system that answers the reg 6(3) questions from the first transaction.
4. The ordinary business setup. Company formation or sole trader registration, VAT if you expect to exceed £90,000, PAYE before the first employee, insurance, and the accounting system that will have to survive an audit.
Decide the client money question deliberately
Holding client money is a choice for a lettings business, and it is worth making on purpose. Hold none — tenant pays the landlord direct, deposits direct, maintenance invoiced direct — and the scheme requirement, the client account condition, the reconciliation work and a slice of PII exposure all fall away. Hold it, and you gain control of the flow and the ability to chase arrears and pay contractors quickly, at the cost of a compliance apparatus that has to run every month without exception.
Structure has a long tail
The company-or-sole-trader decision looks like a tax-rate question at the start and turns out to be an exit question. A company selling a lettings book produces a taxable credit taxed as income with no Business Asset Disposal Relief. A sole trader or partnership selling the same book is within capital gains tax and can claim BADR at 18% up to a £1,000,000 lifetime limit. Neither is wrong, but they are very different outcomes for the same eventual transaction, and the choice is effectively made on day one.
What we do for a new agency
Get the order right, get the client money infrastructure right before it matters, and set the accounting up so that the first regulation 8(1) audit — if you do sales — is a short exercise rather than a reconstruction. Then the ordinary things: registrations, payroll when you hire, VAT when you cross the threshold, and management figures that tell you whether the lettings book covers the fixed costs yet.
Common questions
What has to be in place before we trade?
AML registration first, because it is the only one with a criminal offence attached to getting the timing wrong. HMRC requires you to register before carrying on any activity as an estate agency business and states that trading unregistered is a criminal offence. Redress scheme membership next — required from the moment you engage in relevant estate agency work or lettings agency work, not from your first completion. Then, if you will hold client money: a CMP scheme for lettings, or a properly titled client account for sales, before any money arrives. Company formation, VAT registration if you expect to exceed £90,000, PAYE if you will employ anyone, and insurance sit alongside these rather than before them.
How much does the compliance cost to set up?
The AML side is the predictable part: a one-off £300 application fee, £400 per premises registration, and £40 per beneficial owner, officer or manager tested through the approval process. Then £400 per premises annually on the declaration. If turnover is below £5,000 you pay in full and get a £500 refund once accepted. Redress scheme membership and CMP scheme membership are priced by the schemes and vary. Professional indemnity is a scheme condition for CMP members and is priced on your client money and income. Budget the annual renewals from day one rather than treating them as a launch cost — the £400 per premises comes round every year.
Should we hold client money at all?
It is a genuine choice, and worth making deliberately rather than by default. If the tenant pays rent direct to the landlord, deposits go direct to the landlord and maintenance invoices are issued direct to the client, you hold no client money — MHCLG's guidance accepts exactly that evidence — and the CMP scheme requirement falls away with the client account condition, the reconciliation burden and a chunk of professional indemnity exposure. What you give up is control of the flow, which matters for chasing arrears and for paying contractors quickly. Many new agencies start without client money and add it once volume justifies the infrastructure, which is a reasonable sequence.
Company or sole trader?
It depends on profit level and on what you intend to do with the business, and 2026 changed the arithmetic. Dividend rates rose on 6 April 2026 to 10.75% ordinary and 35.75% upper, which narrows the company advantage at moderate profits. Corporation tax is 19% to £50,000 and 25% above £250,000 with marginal relief between — and the limits are divided by the number of associated companies plus one, so a structure with several companies gets a much lower small profits limit. The other consideration is exit: a company selling a lettings book is taxed on income with no BADR, where a sole trader selling the same book is within capital gains and can claim BADR at 18%. That is a decision made at the start whose consequence lands years later.
Do we need to worry about Making Tax Digital?
If you trade unincorporated, yes, and the thresholds are lower than most people expect. Qualifying income is total income from self-employment and property before expenses — turnover, not profit — taken from the previous year's return. Over £50,000 tested on 2024/25 was mandated from 6 April 2026, with the first quarterly update due 7 August 2026. Over £30,000 tested on 2025/26 follows from 6 April 2027, and over £20,000 tested on 2026/27 from 6 April 2028 — the £20,000 phase is legislated via reg 27 of SI 2026/336, not merely announced. Dividends from your own company do not count towards qualifying income; gross self-employment turnover and gross property income do. Partnerships are deferred with no date announced.
What are the commonest early mistakes?
Trading before the AML registration is granted, which is a criminal offence rather than an administrative slip. Taking a reservation fee or a holding deposit into the business account because the client account is not open yet. Advertising without the material information the NTSELAT guidance requires — council tax band, price and tenure at minimum, plus property type, construction, room measurements, utilities and parking. And writing terms of business that do not comply with EAA s.18, which requires particulars of when the client becomes liable to pay and how the fee is calculated, in the form prescribed by the 1991 Regulations. Get that wrong and the contract is unenforceable except by order of the court.