Starting a Limited Company: Top 10 Tips

15 February 2024

Accounting & Compliance

Starting a Limited Company in the UK is an exciting venture that opens the door to numerous possibilities.

Being well-informed from the outset is crucial, with several important factors to consider.

We share our top 10 insights to guide you through the process when you decide to register, and start up your limited company.

Business Name

The first thing you’re likely to think of is a business name.

Easy enough?

Double check the details

Something to consider is if another company used your desired name before?

If they have, you’ll have to reimagine a new name/ edit the name slightly.

You wouldn’t want to be confused with another Company, nor do you want to risk any legal action from using someone else’s name!

To check, you can use company name availability checker to see if your name is available.

You can give your company a clever or funny name, something with meaning, or simply your name or initials, but ultimately it will be the first thing your customers recognise you by.

What if you change your mind after registering?

You can of course change your company name at any point in time with Companies House.

Paying yourself

The most important part to the majority that start a company, how do I pay myself and how much can I pay myself?

As a director of a limited company, you can pay yourself a salary, take dividends, or a combination of both.

The approach to this can vary depending on what you need and when from your company.

Company Structuring

The structure of the company can be fairly simple if it is only 1 person involved.

However if there is a business partner it is essential that the shares are set up correctly from the start to ensure dividends are paid correctly, voting rights are as expected and any future sale is split in the right proportion.

There are also options to set up group structures with a new company that are both easier and cheaper to do in the beginning than they are a couple of years down the line.

Corporation Tax

As a Limited Company owner in the UK, you’ll have to pay Corporation Tax on your Company profits.

You must register for Corporation Tax within 3 months of your trade starting.

What are the corporation tax rates?

Currently the rates are 25% on taxable profits over £250k and 19% on taxable profits below £50k.

It gets even more confusing if your profits are between £50k and £250k!

If this is the case then the first £50k of taxable profit will be taxed at 19% and the remainder will be taxed at an effective rate of 26.5%.

It’s vital that you have some basic understanding of the Tax System to avoid any unexpected bills..

Filing Deadlines and Payment Dates

Corporation Tax Filing deadlines are 12 months after your year-end but be warned the payment is due 9 months and 1 day after your year-end.

Planning ahead

Here at Friend & Grant, we offer a Tax Planning meeting 9 months into the year so we can forecast your expected tax bill and discuss ways to mitigate this bill – this is a hugely effective exercise and will save you any shocks when it comes to the actual year end!

VAT

If your annual turnover exceeds £85k then you must register for VAT (if your turnover relates to a VATable supply or goods).

VAT can be a very complex issue and brings with it a lot of questions:

Are my supplies taxable?
Can I recover VAT on costs?
How do I submit my VAT return?
What VAT scheme should I use?

These are all questions that you would need to have answered to keep the business compliant and avoid any risk of fines and penalties.

Seeking Professional Advice

Tax laws and regulations can be difficult to understand.

You’ll need to consider having an accountant as they can support with tax planning, compliance, period returns and helping to optimize your tax position while making sure that no deadlines are missed and that all the legal rules are being stuck to.

As a Limited Company, you’ll also have annual filing responsibilities with Companies House and HMRC.

This includes submitting annual accounts, an Annual Confirmation Statement, and Corporation Tax returns.

Missing deadlines can lead to penalties, so staying organized and meeting deadlines is crucial – something which an accountant can help with.

Paying Employees and Sub-Contractor

If you have employees, you must manage PAYE (Pay as You Earn) for their salaries, deducting tax and national insurance from them and paying this to HMRC.

You will also need to consider pensions and autoenrollment for your staff.

To process this all you will either need to have a payroll software or ask your accountant to complete this for you.

Subcontractors are different to employees, you do not have any PAYE responsibilities, however you may encounter requirements under CIS (Construction Industry Scheme) and VAT.

Keeping Financial Records

It’s essential to maintain accurate and up-to-date financial records for your limited company.

This includes records of income, expenses, invoices, receipts, and payroll information.

These records will be vital for tax calculations, filing returns, and complying with HMRC regulations.

How long do I need to keep records for?

Being a Limited Company, you must keep records up to 6 years after the end of the period of the return.

For example, if your year end is 31st December 2023, you must keep records up to 31st December 2029.

It is also essential that you have this back up in the event that there is ever a HMRC investigation into your affairs as this is the supporting documents for every PAYE, VAT, CT return you have submitted.

Opening a bank account

As a new Limited Company, you will also need to open a new business Bank Account.

This not only stops your Company money being mixed with your personal cash, but it also increases trustworthiness with your supply chain as customer will feel more reassured transferring to a Company Bank Account.

Accounting Software/ MTD

Finally, you will need to consider the Accounting Software that you would want to use.

There are many options out there but Xero, Quickbooks and Sage are the most popular.

Using software such as Xero, you can do things such as create your Sales Invoices, put in your purchase receipts/ invoices, use a bank feed to make reconciling your bank easier and help see real life data but overall, it saves you a big headache with your bookkeeping!

MTD Compliance

Limited companies must be compliant with Making Tax Digital regulations with VAT returns and the software can help you do this as you can submit your VAT returns through the system (through connecting with HMRC) which ensures compliance with the rules.

There’s also software that can track your business mileage, take a photo of your purchase invoices and process them through to your accounting software and many other things.

How we can help

Incorporating or starting a Limited Company can feel like a daunting process but here at Friend and Grant, we are more than happy to help and are here to save you the headache and ensure you hit the ground running with the correct set up.

If you would like to find out more, please call us on 01634 731390 or complete a consultation form and a member of the team will be in touch.