The short answer: what it actually costs to start a domiciliary care agency
Starting a domiciliary care agency in the UK costs between £15,000 and £60,000, and the split catches almost everyone out: roughly £2,000 to £6,000 goes on registration and setup, and everything else is working capital to carry you through registration and the payment gap that follows. Domiciliary care, also called home care, means personal care delivered in someone's own home, and in England it cannot be provided at all without registration by the Care Quality Commission (CQC).
Why the range is so wide comes down to two decisions. First, whether you go after council and NHS contracts or private self-funders, because that changes both your rate and how long you wait to be paid. Second, whether you employ a registered manager from day one or hold that registration yourself, which is the single largest line in most launch budgets.
Most people we speak to have already budgeted the visible costs. Very few have budgeted the invisible one. You will pay carers for hours delivered in week one, and a local authority will pay you for those same hours somewhere around week seven. Multiply that across a growing rota and the number gets uncomfortable quickly. Our healthcare and social care accountants spend more time on that single gap than on any other part of a care startup.
Registration and setup costs, line by line
The hard setup costs for a new home care agency come to about £2,000 to £6,000, and roughly half of that is people-related rather than fees. Here is what you actually write cheques for before your first care call.
| What you pay for | Typical 2026/27 cost | Notes |
|---|---|---|
| Company incorporation | £100 | Companies House digital filing fee from 1 February 2026, or £124 on paper |
| Director identity verification | £0 | Free via GOV.UK One Login, compulsory for directors since 18 November 2025 |
| CQC annual regulatory fee | £239 plus £54.305 per person | No separate application fee. A 10-user agency pays about £782 in year one |
| Enhanced DBS check, per carer | £49.50 | Plus umbrella body admin. The Update Service is £16 a year per person |
| Policies and procedures pack | £400 to £1,500 | CQC expects these written and evidenced at interview, not bought and filed |
| Insurance, first year | £600 to £1,800 | Employers' liability is a legal requirement at £5m minimum cover |
| Care management software | £80 to £250 a month | Rostering, eMAR and care records. Priced per service user on most platforms |
| Care Certificate training, per carer | £60 to £200 | Plus paid induction hours, which most budgets forget entirely |
| Website, branding and recruitment | £500 to £3,000 | Carer recruitment advertising is usually the bigger half of this line |
Fee figures confirmed against Companies House, CQC and the Disclosure and Barring Service in July 2026. Market ranges reflect what new agencies we onboard typically pay.
How much does it cost to set up a home care agency with CQC?
CQC charges no separate one-off application fee. What you pay instead is the annual regulatory fee for community social care, worked out as £239 plus £54.305 for every service user you support, at each registered location, with a ceiling of £92,558 for providers supporting 1,700 people or more. Start with 10 people and the year-one fee is around £782. Grow to 50 and it is about £2,954. The fee scales with you, which is fair, but it also means your CQC bill climbs in the same month your payroll does. Full detail sits on the CQC provider fees page for social care services.
Incorporating first matters more than people expect. CQC registers a legal entity, so if you apply as an individual and then incorporate later, you are looking at a fresh registration rather than a name change. Set up the company first, verify the director identities, then apply. Our limited company formation service handles the sequencing so the entity on your CQC application is the entity that will hold your contracts.
Working capital: the cost nobody budgets for
Working capital is the largest single startup cost in home care, and a realistic figure is eight to twelve weeks of full payroll sitting in the bank before you take your first call. Carers are paid weekly or fortnightly because that is what the labour market demands. Councils and NHS bodies invoice in arrears and typically settle around 30 days after a month-end invoice. Deliver care on 3 August and you may not see the money until mid or late September.
Take an agency building toward 400 care hours a week. At the National Living Wage of £12.71 an hour for workers aged 21 and over from 6 April 2026, plus paid travel time between calls, employer National Insurance at 15 percent above the £5,000 secondary threshold, pension auto-enrolment at 3 percent of qualifying earnings and holiday pay accrual, the all-in weekly wage bill lands somewhere around £6,500 to £7,000. Carry six to eight weeks of that and you need £40,000 to £55,000 of headroom before a single invoice is settled.
That is the number CQC is circling when it asks about financial viability at registration, and it is the number most first-time applicants cannot evidence. A forecast that shows the month-by-month cash position, the payroll run rate and the point at which receipts overtake payments does more for an application than any amount of narrative about quality.
One more wrinkle worth knowing early. The Employment Allowance is worth £10,500 against employer National Insurance, but it is withdrawn where more than half your work is for a public authority. Plenty of new agencies build a budget assuming they get it, win a council framework, and quietly lose it in the same quarter.
What you can charge, and whether the numbers actually work
Your hourly rate decides whether the whole plan is viable, and in 2026/27 the gap between what care costs and what councils pay is the central problem in the sector. The Homecare Association calculates a Minimum Price for Homecare of £34.42 an hour for England in 2026/27, being the rate needed to cover legally compliant carer pay, travel time, mileage, wage on-costs and a minimum contribution to running a compliant business. Councils in England are paying an average of £25.05.
That is a shortfall of £9.37 on every hour of council-funded care. At 400 hours a week it is a £3,748 weekly hole against the benchmark. Some agencies survive it on volume, tight rostering and low overheads. Many do not, which is why so many new providers build a mixed book from the start.
Private self-funders typically pay £26 to £38 an hour, with London at the top of that range. Win enough private work and the average across your book climbs above the cost line. Take council hours only, at the average rate, and you are running a business whose gross margin was decided by someone else's budget setting.
Sole trader or limited company for a new care agency
Set up a limited company. For a domiciliary care agency the case is close to one-sided, and the reasons are commercial rather than purely tax-driven.
You are about to employ people who go into vulnerable adults' homes. A limited company puts a legal wall between that employment risk and your house. Councils and NHS bodies also expect a company on a framework contract, and their procurement teams will ask for filed accounts. On the tax side, corporation tax runs at 19 percent up to £50,000 of profit and 25 percent above £250,000, with marginal relief between, against income tax at up to 45 percent plus Class 4 National Insurance if you trade personally.
The counterweight arrived in April 2026. Dividend tax rose two percentage points, so the ordinary rate is now 10.75 percent and the upper rate 35.75 percent, which narrows the extraction advantage of a company by several hundred pounds a year for a typical director. It does not reverse the decision for a care agency. It just means the win is now mostly in liability protection, contract credibility and retained profit rather than headline take-home. We work through the numbers properly in our guide to sole trader vs limited company for a domiciliary care provider.
One practical note for anyone planning to trade personally first. Making Tax Digital for Income Tax became mandatory in April 2026 for sole traders with gross income above £50,000, which means quarterly digital filing rather than one annual return. A care agency crosses £50,000 of turnover in its first few months, so the sole trader route brings a compliance burden almost immediately.
VAT, payroll and the running costs from day one
Your care fees will almost certainly carry no VAT, but that is not the good news it sounds like. Welfare services supplied by a state-regulated provider are exempt under HMRC VAT Notice 701/2, so as the CQC-registered provider delivering personal care you do not add VAT to invoices. You also cannot reclaim VAT on your software, your mileage, your PPE or your professional fees. That irrecoverable VAT is a real cost that sits quietly in every line of your budget.
There is a trap on the other side of that line. An introductory agency that simply places self-employed carers with clients is not supplying welfare services, it is supplying staff, and that is standard-rated at 20 percent. Only that taxable turnover counts toward the £90,000 registration threshold. Getting this wrong in year one creates a VAT liability nobody has budgeted for. We cover the distinction in detail in is domiciliary care VAT exempt.
Payroll is where the real running cost lives. From your first employee you need PAYE registration, Real Time Information filing on or before each payday, pension auto-enrolment, statutory sick pay and holiday pay tracked across irregular hours. Care rotas generate starters and leavers constantly, travel time has to be counted for minimum wage purposes, and any sleep-in or waking-night cover has its own treatment. This is why care payroll costs more to run than a shop with the same headcount.
Here is how the three common approaches actually compare when you are setting up a care agency:
| What you need | DIY / software | Generic accountant | LOYALS specialist |
|---|---|---|---|
| Builds a CQC-ready financial viability forecast | ✗ | ✗ Not a service they offer | ✓ Standard for care startups |
| Gets the welfare VAT exemption right first time | ✗ You self-assess | ● If asked | ✓ Checked at onboarding |
| Counts travel time correctly for minimum wage | ✗ | ✗ | ✓ Built into care payroll |
| Flags the Employment Allowance public-authority rule | ✗ | ● | ✓ Checked before you bid |
| Tracks the council payment gap against payroll dates | ● If you build it | ✗ Year-end focus | ✓ Monthly cash reporting |
| Available Mon to Sat when a rota problem lands | ✗ | ✗ Mon to Fri 9 to 5 | ✓ 10am to 7pm Mon to Sat |
This is why most people registering a new care agency move to a specialist before they submit the application, not after their first year end.
What this means for you: what to do before you apply to CQC
Sequence matters more than speed here, and doing these six things in order will save you months.
- Incorporate first, then register. CQC registers a legal entity. Form the company, complete director identity verification, then apply, so you never have to re-register later.
- Decide your payer mix before you model anything. Council-only at £25.05 an hour is a different business from a private book at £32. Write the assumption down and test it against local commissioning rates.
- Build the cashflow forecast properly. Month by month, showing payroll dates against expected receipts, with the point where receipts overtake payments clearly marked. This is what CQC is testing when it asks about financial viability.
- Fund eight to twelve weeks of payroll. Whether that comes from savings, a director loan or a facility, have it identified and evidenced before you apply.
- Check the Employment Allowance position. If you expect more than half your income from local authorities or the NHS, take the £10,500 out of your budget now rather than discovering it later.
- Set payroll up before your first carer starts. PAYE registration, pension scheme and travel-time rules need to be right from the first payslip, because backdating minimum wage corrections across a rota is expensive and slow.
None of this is complicated. It is just unforgiving about order. Get the entity, the forecast and the payroll right before you apply, and registration becomes an administrative process rather than a fight. You can check your own agency's position in a free call with LOYALS.