1. How do I register as a limited company?
You can do this directly via Companies House.
You can use a formation agent.
You can come and talk to us, and we’ll do everything including founder certificates and registration for all relevant taxes – see our company incorporations factsheet.
2. How do my company taxes work when set up as a limited company / what are the filing deadlines for company accounts and company tax?
A limited company is a separate legal entity to you – and has its own tax year – this is driven in the first instance by the date you incorporate – defaulting to the month in which you incorporate.
So, if you incorporate on 14th March 2016, your company year-end will default to 31 March 2017.
You have to watch two points here however in the first year:
- you have 9 months to file accounts with Companies House as a general rule, but in the first year the 9 months run from a year after your date of incorporation.
- HMRC work in 12 month periods for the company’s corporation tax – in the first period, if greater than 12 months (even by a few days), you will need to file two CT600s (company tax returns) with HMRC – in the 14th March example, one for 365 days and the other, for 17 days. You have 12 months to file the CT600.
You can change year end dates – shorten and extend (up to 18 months).
Corporation tax is again payable 9 months after the year end date – in the first period, you will therefore have circa 21 months before your first corporation tax bill is due – good for cashflow.
- you have 9 months to file your accounts with Companies House following the year end date (bar the first year rule).
- your corporation tax is payable 9 months after the year end date (note two CT600s may be needed to be filed in the first period if greater than 365 days).
- your corporation tax return (CT600) is due 12 months after the year end.
Corporation tax is based on turnover (revenue) less costs, and is currently 20% (due to drop over the next couple of years).
We look after all of this for you to keep your tax to the minimum possible as part of both our starter and complete packages, please get in touch on 01865 24 55 11.
3. How do my personal taxes work?
Whatever your company’s tax year is, you, as a director, will have to file your own self-assessment tax return for the year 6th April to 5th April.
There is a well executed model, which is as follows:
- take a small director’s salary, which is maximised, suffering no PAYE, create the greatest possible corporation tax deduction and credit you for national insurance.
- this amount moves each tax year, some years it is more favourable to pay a little NI, to recover more relief on the company’s corporation tax.
- you may also get nuances per director based on domicile and residence too.
you take additional remuneration through dividends.
- now there are changes here, as the first £28k of, ‘net’, dividends used to have no personal tax on them, from 6th April 2016, the net and gross concept is to be abolished; the first £5,000 will be tax free, with further dividends up to the basic rates of tax, now being taxed at 7.5%
Furthermore, with the new rules, there will be 7.5% added to dividends at each rate of tax: basic, higher and additional.
Basic rate: 7.50%
Higher rate: 32.50%
Additional rate: 38.10%
The changes in the new rules, at the basic rates of tax mean a personal tax bill of circa £1,655 a year – personal tax is due 9 months after the end of the personal tax year (31 January – the same time that the personal tax return needs to be filed); for liabilities over £1,000, HMRC then puts you on tax instalments – 31 July and 31 January – the instalments are based on half of the last year’s tax, so, in this example, your January bill would be £1,655 + (£1,655/2) = £2,483 and your July bill would be £828.
Even with these new taxes, it will be more advantageous and flexible to structure as a limited company.
Now continuing with the well executed path…
- when you come to sell / shut / leave your company, you can attract Entrepreneur’s relief (at 10%) on the final distribution.
- there are certain rules again here to qualify for the relief, and for amounts over £25,000 you may need to appoint a liquidator if you are looking to wind the company up (will cost you circa £2,000 net through our contacts).
So, avoiding the sale / wind up final year, in summary:
- your personal tax is based on your small director’s salary and dividends from your company.
- your self-assessment tax return is due on the 31 January following the year to the 5th April, so 5th April 2016, is due 31 January 2017.
- taking a director’s salary up to £10k and then dividends of £30k, cause a personal tax bill of £2,483 in January and £828 in July.
Of course, there are many other possibilities, if you earn other income (rental / investments) etc… Please call us now on 01865 24 55 11 to discuss further.
4. Are there any other filing deadlines etc that I need to be aware of when operating as a limited company?
- your director’s salary needs to run via a payroll (i.e. a PAYE system – even though there may be no PAYE due on your salary).
- HMRC now operate, RTI (real time information), we need to tell them about every payment made to a director / employee.
- payroll deadlines are the 19th of the month following the month of payment.
This is all taken care of through the starter and complete packages with our software.
ANNUAL RETURN and company secretarial
- the annual return is a once a year snapshot of the standing data of the company (shareholders, addresses, directors etc).
- we use designated company secretarial software to complete this process.
- we also provide dividend vouchers at the year end to support HMRC regulatory requirements.
Again, this is all taken care of through our starter and complete packages.
- returns are due 1 month and 1 week following the end of your VAT quarter.
- it may be beneficial to reduce administration to opt for flat rate VAT (turnover < £150,000 – must leave the scheme > £230,000).
Our starter package does not include book-keeping for VAT, for this, you need the complete package, both deals however will file the VAT returns for you.
- only relevant when you start to employ others, all UK employers are now required to operate a pension scheme.
- we bolt this onto our payroll software, when you know your staging date, get in touch with us to administer.
Please call on01865 24 55 11 to discuss all 4 points in more detail.