Isn't it funny that the first thing people do is blow the budget? I am no different.
You really don't need a DAC in My First Hi Fi. Why would you want to spend £230 of a £350 budget on that?
I'd go further and say you also don't at this point need separate amp and speakers let alone a CD player.
You already have a PC with all of your CDs ripped so that is a good start. £350 is tight budget and I would recommend you look at powered speakers with a music streamer, most if not all music streamers these days already come with a half decent DAC in built. Check out Wiki and you will see that the same few DAC chips pop up in manufacturer DAC boxes, but the price tags vary wildly.
Just over £350 would get you a Squeezebox Classic £150 (with decent Burr Brown DAC inside) and a pair of Audioengine A5 powered speakers (£250). If you could find a little more money (£300) you could stretch to the new Squeezebox Touch, which not only has has a better DAC, a reportedly good touch screen interface, but also can run as a stand alone server with an HDD attached, freeing up your PC for other stuff.
As an aside this also opens up the whole world of internet radio - 192kps Radio Paradise has been a joy to discover.
Upgrades? There is the whole cabling/interconnects thing. The A5s could redeployed in another room when more budget comes (I use mine in my home office). You could add a sub if you like to go low. You could add a DAC (I added a DACMagic) although check out on Wiki and you may see that many expensive Hi Fi DACs share DAC chips with that integrated in much cheaper kit.
You could later go the whole route and look at more expensive ADM 9.1s fully active and powered speaker typre route, or still just get a traditional good amp and passive (non powered speakers). The Squeezebox devices can be redeployed.
Sonos is good streaming alternative and easy to get going with but more costly.
Suggested elsewhere getting digital extract from PC direct to an Apple AEX, then onto amp/apeakers or again powered speakers, is another way, but will tie up the PC and also lock you to iTunes and exclude FLACS that always perform far better than than compressed MP3s and MP4s that most rip to. It can also be fiddly to set up . You also need a PC that can provide digital out. The beauty of a streamer is that they just need a wired or wireless stream stream of 1s and 0s from any hard drive, then they do the rest in the box providing correct output to powered speakers or amp.
Check out reviews for Squeezebox Classic and Audioengine A5s. You will also have a very minimal system.
Good luck. It may be confusing but in principal you need to decide whether to go traditional Hi Fi separates or computer based audio, or a combination.