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5 tops tips for Limited companies

The important things about running a limited company

Running a limited company has many pitfalls and responsibilities.  One of the most important is to file statutory accounts with companies house and HMRC.

Number 1

Filing accounts and CT600

This is an annual requirement consisting of a set of abbreviated accounts filed with companies house and a full set of accounts filed in the form of a CT600 with HMRC.

It ties in with the companies accounting period which will often be different from the main fiscal tax year.  You should check with companies house or us if you are not sure of the company year-end.

Sadly there is an instant penalty from companies house for late filing, so its always good to plan ahead.

Although it is possible to file these yourselves, particularly the abbreviated accounts we would always advise you use a professional accountant.  The document filed is a public document and must be factual.  More complicated are the full accounts filed with HMRC.  These determine the amount of corporation tax due, again it must be factual and preparation by a professional accountant is advisable.

Number 2

P.A.Y.E

As well as the accounts preparation and filing you should possibly be registered for PAYE. (Pay as you earn)  A limited company is a seperate entity and as such should be registered as an employer.  Even if you are an owner operator if you are taking funds from the company its very probable that the majority of that should be through a salary, the balance being in dividends.  This not only satisfies compliance, it actually saves you corporation tax as well!  Again, this is where a professional advisor is so important.

Number 3

Self-Assessment

As a director and shareholder of a limited company you will need to register with HMRC for self assessment.  This will mean filing a personal tax return for the relevant times of trading.  Its important to keep track of dividends paid as these are allocated in “Real time”.  E.G you take £33,000 between April and March and thats what is filed.  It is rather confusing as the personal tax is governed by the fiscal tax year, being April to March whereas its very likely as mentioned before your company accounting period is different!  Again seeking advice from a professional accountant is the best path.

Number 4

CS01

Formerly know as the “Annual return”.  This is the report filed with companies house informing of any changes to directors and shareholders.  Generally its a straightforward matter of filing the same return each year but when there is a change of shareholding timing can be crucial.  Again, seek the advice of a professional accountant.

Number 5

Taxes

The two main types of tax paid are corporation tax.  This is paid on the net profits, or “The bottom line” as the Americans like to say!  If you can imagine the sales being the top line, followed by expenses which will include payroll, and other business expenses.  This gives the net profit.  Corporation tax is currently 19%.

Shareholders also pay tax on dividends now.  A rough guide is that after the first £2000 its 7.5% up to the higher rate.  The general rule of thumb is to always ensure your total income is below the higher rate.  Once you tip into the upper scales then not only do you pay more tax the payments on account become very high.

In certain conditions there is also an extra tax to pay if you have borrowed money from the company.  Whilst directors loans can be useful there are strict conditions laid down and need to be adhered to.  Again, thats why its best to leave these things to a professional accountant.