Starting a Limited Company: Everything You Need to Know

Forming the company takes an afternoon. Starting a limited company properly takes a little longer, because the certificate of incorporation is the start of a set of duties, not the end of them. This guide walks through what happens after the company exists: the first 90 days, the registrations with HMRC, how you pay yourself, and the deadlines that arrive in the first two years. Get these right early and the company runs itself; miss them and the penalties are automatic.

Before you form: three decisions

A few choices are easier to make before the company is registered than to change afterwards.

• Who owns it. Shares decide who gets the dividends and who controls the company. If you are starting with a partner, agree the split and what happens if one of you leaves, and put it in a shareholders' agreement.
• Who runs it. You need at least one director aged 16 or over, and every director must verify their identity with Companies House.
• Where it is based. The registered office is public. If you work from home, a registered office address keeps your home off the register.

Our comparison of a company and a sole trader helps if you are still deciding whether a company is right at all.

Starting a limited company: the first 90 days

1. Open a business bank account

The company's money must be kept apart from yours. Most banks need the certificate of incorporation, the company number and identity documents for each director. Pay everything the business earns into this account and pay its costs from it; mixing the two is the most common source of tax problems in a new company.

2. Tell HMRC the company is active

Companies House tells HMRC the company exists, and HMRC sends a Unique Taxpayer Reference to the registered office. You still have to register for Corporation Tax yourself within three months of the company starting to trade, buy, sell or advertise. Missing this is a penalty in its own right.

3. Set up payroll if you will pay a salary

If anyone, including you as a director, will be paid a salary at or above the lower earnings limit, the company must register as an employer for PAYE before the first payday and report every payment to HMRC on or before the day it is made.

4. Decide on VAT

You must register for VAT once your taxable turnover passes £90,000 in any rolling 12 months, or if you expect it to pass that in the next 30 days alone. Below the threshold you can register voluntarily, which can make sense if your customers are VAT-registered businesses or you have large costs with VAT on them. Our VAT registration service handles the application.

5. Put your records in order

Choose accounting software, keep every invoice and receipt, and record what you pay yourself. The company must also keep its own statutory records, including its register of members, minutes of decisions and copies of the documents it files.

How you pay yourself

The company's money is not yours until it is paid to you. There are three usual ways to take it out.

• Salary. Paid through payroll, with Income Tax and National Insurance. Many directors take a modest salary to build up State Pension entitlement.
• Dividends. Paid out of profit after Corporation Tax. They have a £500 tax-free allowance and are taxed at 10.75% in the basic rate band and 35.75% in the higher rate band from April 2026. A dividend can only be paid if the company has enough retained profit, and each one needs a board decision and a voucher.
• Expenses. The company can repay you for genuine business costs you have paid personally, with receipts.

Taking money that is none of these creates a director's loan. If it is not repaid within nine months of the company's year end, the company pays extra tax on it until it is.

Your deadlines in the first two years

A new company's calendar looks unusual because its first accounting period is set from the date it was formed. These are the dates to put in your diary.

WhatWhen Register for Corporation TaxWithin 3 months of starting to trade First confirmation statementWithin 14 days after the first anniversary of incorporation (£50 online) First accounts to Companies House21 months after the date of incorporation Corporation Tax payment9 months and 1 day after the end of the accounting period Company Tax Return (CT600)12 months after the end of the accounting period Directors' Self Assessment31 January after the end of each tax year

One detail catches many people out. If the company's first accounts cover more than 12 months, HMRC splits them into two Corporation Tax accounting periods, each with its own return and payment date. The GOV.UK guide to accounts and tax returns sets out the full rules.

Your duties as a director

Being a director is a legal role. You must act within the company's articles, promote its success, use independent judgement and reasonable care, avoid conflicts of interest and declare any interest in a deal the company makes. You must also keep Companies House up to date: a new director, a change of address or a new person with significant control has to be reported, usually within 14 days. Our guide to directors' responsibilities covers these in detail.

Mistakes we see in the first year

• paying personal costs from the company account without recording them
• paying dividends when the company has no profit to pay them from
• forgetting to register for Corporation Tax because the company was "not doing much yet"
• leaving the first confirmation statement until a reminder arrives, then missing it
• using a home address as the registered office and finding it published online

How we can help

We form limited companies with every director's identity check included, and can take care of the registrations, payroll and yearly filings that follow. To see what ongoing accounts would cost for your company, get an instant quote.