Limited Company Accounting in the UK
Running a limited company involves more administrative obligations than sole trading. Understanding the key requirements and timescales avoids costly penalties and keeps Companies House and HMRC satisfied.
Annual Accounts
Every limited company must prepare annual accounts conforming to the Companies Act. Small companies (meeting two of three criteria: turnover below £10.2m, balance sheet below £5.1m, fewer than 50 employees) can file abbreviated accounts. Micro-entities (turnover below £632,000) can file even simpler accounts. Full accounts for a typical one-person consultancy are a straightforward document; an ICAEW or ACCA-registered accountant prepares them routinely.
Corporation Tax
Corporation Tax (CT) is payable on company profits. As of 2024, the main rate is 25% for profits above £250,000. The small profits rate of 19% applies to profits up to £50,000. Marginal relief applies between the two thresholds. A CT600 return must be filed with HMRC within 12 months of the year end; tax is payable nine months and one day after the year end.
Director Salary and Dividends
Most directors of owner-managed companies take a combination of salary and dividends. A common arrangement is to pay a salary at the National Insurance threshold (£12,570 in 2024/25) to protect state pension entitlement without triggering employer NI, then take profits as dividends. Dividends above the £500 dividend allowance (2024/25) are taxed at 8.75% (basic rate), 33.75% (higher rate) or 39.35% (additional rate).
Confirmation Statement
Every company must file an annual confirmation statement with Companies House confirming its registered details. The fee is £13 online. Failure to file can result in striking off.
IR35
IR35 rules assess whether contractors working through a personal service company should be treated as employees for tax purposes. Off-payroll working rules (Chapter 10 ITEPA 2003) mean that in the private sector, medium and large clients must determine IR35 status rather than the contractor. Getting this wrong creates significant tax liability. Specific advice from an accountant familiar with IR35 is advisable if operating in consultancy or contracting.
