5 things you need to know about limited companies

1. Business bank account 

The limited company must have a business bank account in its name. Unlike a sole trader, you can’t use your personal bank account to manage the company finances. This ensures that you keep the company cash and assets separate from your own, as well as any liability. 

Setting up a business bank account is simple once you’ve registered your company and got the relevant paperwork.  

Always carry out research before you sign up for a bank account. Different providers will offer you different rates and services. The type of account you require will depend on your business. For example, you may not need if you won’t have cash or cheques to pay in you may not require a bank with branch locations. 

2. Register with HMRC 

Limited companies must register with HMRC. You usually complete registration at the same time as registering with Companies House. Once registered you will receive company's Unique Tax Reference (UTR). 

You should register with HMRC for Corporation Tax and PAYE (if applicable) within three months of starting the business. 

3. Display company name and number on invoices 

All company invoices must include various information, including the company name and company registration number, as well as other important information. Similarly, any cheques or payments received should also be in the company’s name. Keeping clear separation of your own and the company’s finances is important. 

If you’re running multiple businesses, you must be clear about the work each business is carrying out. You can’t choose what income goes where, the business completing this work must report the income.  

Putting similar finances through different structures may prompt HMRC to ask about your finances. Concern may arise that you’re evading tax. This includes limiting your turnover by putting finances through a different business to avoid reaching the VAT threshold. 

4. Filing requirements 

As a limited company, there are more filing requirements you’ll need to consider than sole traders will deal with. We’ve summarised these for you here: 

You'll need to file accounts with Companies House. The type of accounts required depend on the classification of the company into three size categories. The filed accounts will be available on the public register for anyone to look at. 

You must send your company's tax return to HMRC and include the necessary accounts and other documents. 

You must submit a confirmation statement annually to Companies House. This confirms the company information is up to date and correct. 

Notifications to Companies House and/or HMRC include changes in directors, issue of shares, change in accounting reference date. 

If you’re VAT registered or an employer you will also need to comply with the filing requirements of these schemes. 

You can stay on top of your filing deadlines with our guide. 

5. Separate legal entity 

As mentioned in this article, company money is not your personal money. One of the advantages of a limited company is the separation between yourself and the company. This means that you do not take on the company’s risks and liabilities. 

The company, the directors and the shareholders all have a clear distinction, although a shareholder may be a director.  

The company pays corporation tax on the income it earns. A director pays tax on the income they take out of the company via salary and other taxable benefits. The shareholders pay tax on the income they take out of the company as dividends. 

How TaxAssist Accountants can help 

Running a company doesn’t need to be hard, we’re experts in assisting business owners and can help you. Contact our friendly and experienced team today by calling 0116 3032060 or using our online contact form. 

 

Date published 4 Jan 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

---