Your complete guide to accounting for a limited company in the UK

Accounting for a limited company in the UK is more complicated than sole trader accounting. Having a qualified accountant can give you peace of mind that all your finances are in order.

Do I need an accountant for a limited company in the UK?

Limited companies in the UK are not legally required to use an accountant. However, accounting for limited companies can become quite complex so it can be more efficient and cost effective to use an accountant to prepare tax returns, run payroll and manage your bookkeeping, leaving you free to work on your core products and services.

What services are included in accounting for a limited company?

Most accountants provide a range of services, not just the compliance work of completing tax returns.

Setting up your limited company

An accountant can assist you to set up your limited company with Companies House to ensure all the data is correct, especially the accounting year end date which drives many of your tax deadlines. Avoid problems down the line by having someone qualified and familiar with the setup take care of it for you.

Setting up your accounting system

These days many accountants use cloud accounting technology which means you have instant access to your numbers, anytime, anywhere. This makes financial management of your business much easier as you can use an app or website to log into your accounts, view transactions and run reports. Your accountant can assist you with the set up and usually provide training on how to use the package.

Bookkeeping

Accounting for a limited company correctly starts with accurate basic record keeping. If you don’t keep on top of your invoicing and receipts, you can’t hope to have good financial data for decision making. Some accountants also provide bookkeeping services saving you hours of time on the data entry in your business. While you may not feel like bookkeeping is a value add activity, you’ll be glad you kept on top of it if HMRC ask to see your backing documents.

Payroll

As your business grows, you’ll need to hire staff to help you so accounting for a limited company often means running a payroll, even if it’s a payroll of one. Many limited company directors will take a small salary (up to the personal allowance for income tax, currently £12,570 a year (correct as at 2024/25). This requires a payroll to be run and documentation to be sent to HMRC for PAYE purposes. Your accountant can ensure that the correct money goes to your employees bank accounts and to HMRC for income tax and National Insurance payments.

VAT return

The dreaded VAT return can suck up hours of your life – let’s face it, not many business owners look forward to this task. Pass it off to your accountant and go and do something less boring instead. Don’t forget there are various VAT schemes; your accountant can help you decide which one is right for you and ensure your VAT returns are filed on time. They’ll pay your VAT bill or submit your VAT reclaim too.

Annual accounts

Accounting for a limited company is a little more involved that accounting for a sole trader. Once you’ve registered with Companies House, you are legally required to submit annual accounts and a confirmation statement each year. There are strict deadlines for this reporting and failure to file on time results in penalties and fines. Persistent non-submission can even result in your company being struck off the register at Companies House.

Corporation Tax return

Limited companies are taxed under Corporation Tax. This means your accountant will need to calculate your profits based on the rules for limited companies which are different to sole traders. Accounting for a limited company gives more tax deductibles so by using an accountant who understands all the rules, you can minimise your tax liability.

Self-assessment return

Many accountants will include a limited company director’s personal tax return in their standard packages for accounting for a limited company.

What are the benefits of using an accountant?

Accounting for a limited company requires a good current knowledge of accounting standards and tax regulations. By using an accountant, you can rely on them to keep up to date so you don’t have to. The best benefits are:

• Saving time
• Reducing errors
• Meeting deadlines
• Avoiding fines and penalties
• Having up to date data for decision making
• Staying compliant without being stressed

FAQs

What financial statement are required for a limited company?

The size of your company will determine which annual accounts statements are required by Companies House. Commonly this will include the balance sheet as at your accounting year end, the profit & loss account for the year and a director’s report.

What expenses can you put through a limited company?

Limited company tax deductibles can change over time but generally you can claim items which are wholly, exclusively and necessarily for business purposes. This would include everything from travel costs to mobile phones, subscriptions to private medical cover.

When should I hire an accountant?

While there isn’t one right answer to this question, it makes sense to hire an accountant for your limited company as soon as you decide to set up. They can make sure everything is done correctly from the start which can avoid a lot of heartache and additional costs later if they need to unravel any errors you’ve made.

How much do accountants charge for limited companies accounting?

Standard accounting packages which include preparation of the annual accounts, Corporation Tax return, Self-assessment for the director and a directors payroll starts from around £150/m. If your business has a lot of staff, you require bookkeeping or monthly management accounting, then costs can increase substantially However, accountants are often able to save their fees through better tax planning or to increase the company’s profitability through business advisory, so it pays to think of the accountants fee as an investment.

How much can a limited company earn before paying tax?

There is no tax-free allowance on limited company profits like there is with income tax. The tax bands are as follows:

If your profits are between £50,000 and £250,000, you may be able to claim Marginal Relief to reduce your Corporation Tax rate.

Why use Adams Accountancy for your limited company accounting?

Adams Accountancy has highly qualified and experienced staff who can dig into the detail of your company to help you become more tax efficient and improve your productivity and profitability. Complete our online contact form or give us a call on 01322 250001 to chat about how you can benefit from working with us.