Going Limited? Here’s What You Need to Know First

Setting up a limited company in the UK can offer a range of benefits, including limited liability, potential tax efficiency, and a more professional image. However, it also comes with added responsibilities and stricter reporting requirements compared to sole traders or partnerships.

Starting a Limited Company

To start, you’ll need to register (incorporate) your company with Companies House. This can be done online and usually takes 24 hours. You’ll need a unique company name, a registered office address in the UK, and at least one director. You’ll also need to prepare and submit key documents such as a memorandum and articles of association and details of people with significant control (PSC).

Key Compliance Requirements

Once set up, limited companies are legally required to:

• File annual accounts with Companies House.
• Submit a Confirmation Statement (formerly Annual Return) every year.
• Register for and submit Corporation Tax returns to HMRC.
• Keep accurate records of income, expenses, assets, liabilities, and board decisions (known as statutory records).
• Operate a company bank account (recommended for clear separation of finances).
• Run payroll if the company pays directors or employees (register for PAYE).
• Report any changes in company structure, directorship, or shareholdings to Companies House.

Key Dates and Deadlines

• Company formation date: This starts your accounting reference period (usually 12 months).
• First accounts due: 21 months after incorporation.
  Example: If you form a company on 1 May 2025, your first accounts are due by 1 February 2027.
• Confirmation statement: Must be filed every 12 months (usually by the anniversary of incorporation).
• Corporation Tax return (CT600): Due 12 months after your accounting period ends, but tax must be paid 9 months and 1 day after the end of the financial year.
• PAYE filings: Real-Time Information (RTI) submissions are required on or before each pay date if you run payroll.

Tax and Financial Responsibilities

Unlike sole traders, the company pays Corporation Tax on its profits. Directors can be paid through a mix of salary and dividends, often leading to more tax-efficient strategies (with careful planning). Dividends must be taken from post-tax profits and properly recorded in board minutes.

MTD for Limited Companies

Making Tax Digital (MTD) is currently only mandatory for VAT-registered companies with a turnover over £90,000. MTD for Corporation Tax is not yet in force—it’s expected to be introduced no earlier than April 2026, subject to further consultation.

Record Keeping

You must keep records for at least 6 years, including financial transactions, VAT (if registered), PAYE, dividend vouchers, and statutory meeting notes.