Limited Company Guide
A private limited company creates a legal entity separate from its owners. That separation can be commercially useful, but incorporation also creates formal responsibilities for directors, shareholders and the company itself. This expert guide covers choosing a company, naming it, registering with Companies House, Corporation Tax, accounting records, payroll, dividends, VAT, annual filings and when professional advice can add value.
UK limited company guide
Limited Company Guide: How to Set Up, Register and Run a UK Company
A private limited company creates a legal entity separate from its owners. That separation can be commercially useful, but incorporation also creates formal responsibilities for directors, shareholders and the company itself. This expert guide covers choosing a company, naming it, registering with Companies House, Corporation Tax, accounting records, payroll, dividends, VAT, annual filings and when professional advice can add value.
What is a private limited company?
ADVERTISE HEREPromote your business to Accounting Hire visitors.Ask about advertising opportunities →A private company limited by shares is commonly used by owner-managed businesses. The company owns its assets and enters into contracts in its own name. Shareholders own the shares, while directors are responsible for managing the company. One person can commonly be the sole shareholder and director, subject to the legal requirements.
Limited liability can provide a degree of separation between the company and its owners, but it is not an absolute shield. Personal guarantees, wrongful or unlawful conduct, director duties, certain tax liabilities and other circumstances can create personal exposure. Appropriate insurance and professional advice remain important.
Sole trader vs limited company
| Issue | Sole trader | Limited company |
|---|---|---|
| Legal entity | No separate company. | Separate legal entity. |
| Owners | Individual business owner. | Shareholders own shares. |
| Management | Owner manages the business. | Directors manage the company. |
| Liability | Generally unlimited personal liability. | Limited liability may apply, subject to exceptions. |
| Profit | Business profits are the proprietor’s profits for tax purposes. | Company profits belong to the company until properly extracted or otherwise dealt with. |
| Company filings | No Companies House annual accounts filing as a sole trader. | Company accounts and confirmation statement obligations apply. |
| Corporation Tax | Not a sole trader tax. | Company profits can be subject to Corporation Tax. |
| Taking money out | Owner can generally draw money from the business, with tax based on the relevant rules. | Salary, dividends, expenses and director’s loan transactions need correct accounting and tax treatment. |
How to register a limited company
You register a company with Companies House before trading as that company. The registration process establishes the company and records information such as its registered office, directors, shareholders and people with significant control.
1
Choose the company type
Most owner-managed businesses use a private company limited by shares, but other structures exist.
2
Choose the name
Check Companies House and trade marks, and make sure the name is appropriate for the business.
3
Choose directors
You need at least one director for a private company. Directors have legal responsibilities.
4
Choose shareholders
A company limited by shares needs at least one shareholder. The shareholder can also be the director.
5
Identify PSCs
People with significant control must be identified. This can include someone with more than 25% of shares or voting rights.
6
Prepare company information
You’ll need a registered office, SIC code, share information and the required constitutional information.
7
Register with Companies House
Submit the incorporation application, pay the filing fee and complete any required identity verification.
8
Set up tax accounts
Corporation Tax is normally set up as part of registration, unless the company is dormant, with further steps after the UTR arrives.
9
Set up the business properly
Open banking, accounting records, payroll where needed, VAT where required and a compliance calendar.
GOV.UK currently states that online company incorporation costs £100 and is usually completed within 24 hours, although processing can vary. The current paper fee is £124. Check the latest Companies House registration service.
What you need before registering
| Information | What to prepare |
|---|---|
| Company name | A name that complies with the company-name rules and is not already unavailable. |
| Registered office | An appropriate UK registered office address for the company. |
| Registered email | A company email address for Companies House communications. |
| Directors | Director details and any identity-verification requirements that apply. |
| Shareholders | Names and shareholdings for a company limited by shares. |
| PSC information | Details of people with significant control. |
| SIC code | The code describing the company’s main business activity. |
| Articles | The company’s articles of association, usually based on model articles unless bespoke provisions are used. |
Choosing a limited company name
The company name is more than a branding decision. Check Companies House for existing names, search trade marks, secure a sensible domain and consider how the name will work if the business expands. Avoid choosing a name solely because a domain is available.
There are restrictions on certain words and names that could be considered offensive or imply a connection with government or another protected organisation. Some names require permission. Check the official company-name rules.
After incorporation: the first jobs
- Store the certificate of incorporation and company number securely.
- Set up a dedicated company bank account.
- Create bookkeeping and document-retention procedures.
- Set up Corporation Tax services once you have the company’s UTR and follow HMRC’s instructions.
- Register for PAYE if the company becomes an employer, including where applicable to director remuneration.
- Assess VAT registration and any voluntary-registration decision.
- Set a calendar for accounts, confirmation statement, tax and payroll deadlines.
- Make sure invoices identify the company correctly and meet applicable requirements.
Corporation Tax
Corporation Tax is charged on taxable company profits. The calculation is not simply a percentage of turnover. Accounting profit is adjusted under tax rules, and reliefs, losses, capital allowances and other factors can affect the amount payable.
| Profit position | 2026 headline treatment | Important context |
|---|---|---|
| £50,000 or less | 19% small profits rate | Subject to the detailed rules, including associated companies and the definition of taxable profits. |
| £50,000 to £250,000 | Marginal Relief can apply | The effective rate rises gradually rather than jumping immediately to 25%. |
| Above £250,000 | 25% main rate | Special rules and associated-company considerations can affect thresholds. |
These are the Corporation Tax rates applying for profits in accounting periods starting from 1 April 2026. Always check the current HMRC rates for the company’s accounting period. View the current HMRC rates.
How should a director take money from a company?
A company director should not treat the company bank account as a personal bank account. Common routes include salary, dividends, legitimate business expense reimbursement and, in some circumstances, director’s loan transactions. Each has different accounting and tax consequences.
Salary
Salary is normally processed through payroll. PAYE and National Insurance rules may apply. The company records the remuneration as an expense subject to the relevant tax rules.
Dividends
Dividends are distributions to shareholders and are not simply another type of salary. The company must have sufficient distributable profits and the appropriate corporate records should be created. Dividends are generally allocated according to share rights unless the company’s structure provides otherwise.
Director’s loan account
Money moving between you and the company can create a director’s loan account. This area can become complicated quickly, particularly where the account is overdrawn or remains outstanding. It should be recorded correctly rather than treated as an informal withdrawal.
Company accounting records
Good company bookkeeping is not just about producing year-end accounts. The records should allow the director to understand cash, sales, costs, VAT, payroll, debtors, creditors, assets, loans and amounts owed to or by directors. Keep invoices, receipts, bank records, payroll reports, dividend paperwork and other supporting evidence in an organised system.
Annual accounts and confirmation statements
Limited companies have formal filing responsibilities. Directors remain responsible even when an accountant prepares the accounts. You need to understand the company’s accounting reference date, accounts filing deadline, confirmation statement cycle and Corporation Tax payment and filing obligations.
Small companies can have different accounts and reporting requirements depending on their size and circumstances. Do not assume that being small means there is nothing to file.
VAT, payroll and employees
A limited company may need VAT registration if it meets the VAT requirements. It may also need PAYE registration when it employs people. Employers can have duties covering payroll deductions, workplace pensions and employment law. Check current VAT registration rules.
When should a limited company use an accountant?
You can perform some accounting tasks yourself, but a limited company creates more areas where professional review can be valuable: Corporation Tax, year-end accounts, payroll, VAT, dividend paperwork, director’s loan accounts, management reporting and decisions about extraction of profits.
When comparing accountants, ask exactly what the quoted fee includes. A low headline price may cover only annual accounts and a tax return, while another provider may include bookkeeping, payroll, VAT, software and regular advice.
Limited company compliance checklist
- Keep statutory and accounting records up to date.
- Maintain accurate bookkeeping and reconcile bank accounts.
- Record dividends correctly.
- Monitor the director’s loan account.
- Submit Corporation Tax returns and pay tax on time.
- File annual accounts with Companies House by the relevant deadline.
- File confirmation statements as required.
- Keep Companies House information accurate.
- Assess VAT and PAYE obligations.
- Review insurance, contracts and employment responsibilities as the business grows.
Official sources
GOV.UK: Set up a private limited company
GOV.UK: Register your company
GOV.UK: Corporation Tax
GOV.UK: VAT registration