How to start a limited company in 2024/25 (UK)

Choosing a company structure is important when starting a business in the UK. Businesses can be sole traders, limited companies, limited liability partnerships, or public limited companies.

Many new businesses decide to start a limited company, as there are many benefits to this structure over other types of companies. Starting a limited company is not difficult. Here are our tips on how to start a limited company in 2024/25 in the UK.

But let’s start with the basics.

What is a limited company?

A limited company is a type of business structure in the UK. All UK limited companies have to be registered at Companies House. You can complete this process yourself or use an accountant such as dns accountants, who will act as a company formation agent for you and complete and process the application on your behalf.

A limited company is considered a separate legal entity distinct from its owners or directors. This offers company owners limited liability protection. A limited company director will have limited liability up to the amount they have invested in the company. This shields a director’s assets, such as their home or savings, from any debts or liabilities the business may incur.

This separate legal identity between the company and its owners differentiates limited companies from other business structures like sole trader companies or partnerships. It allows the business to operate with autonomy and protect the individuals involved.

Setting up a limited company

Why choose a limited company structure?

Private limited companies in the UK offer some significant benefits. The key advantages of a limited company are:

Limited liability protection

As a separate legal entity, the company’s business finances, business debts, and obligations are separate from those of its owners/shareholders. Limiting personal liability is a huge benefit to company directors as it protects the personal assets such as their homes, money and investments, if the business gets into financial or legal issues. This limited personal liability provides peace of mind and financial security for the business owners.

Raising capital

Private limited companies can allow the business to raise capital more easily by issuing shares. This benefits companies looking to grow, expand or invest in new projects.

Tax-efficiency

A limited company structure can be more tax-efficient than operating as a sole trader. Limited companies pay corporation tax on their profits. Corporation tax is generally lower than the personal income tax rates paid by a sole trader or a self-employed individual via self-assessment. Depending on profits, corporation tax rates range from 19% to 25%, whereas income tax rates range from 20% to 45%.

Limited companies can also benefit from various tax deductions and allowances. For example, a limited company can claim a wider range of business expenses and capital allowances for purchasing assets. These tax-free benefits and reliefs can significantly reduce a company’s tax burden and may not be available for an individual operating as a sole trader.

Improved credibility and professionalism

Establishing a limited company can improve your business’s credibility with potential customers and suppliers. This can be very important for companies looking to secure larger contracts, attract funding, expand, or operate in more competitive markets.

Starting and registering your limited company

Choose the type of limited company

You should consider which limited company structure best suits your business. The options are:

• Private company limited by shares: This is the most common type of limited company, where the owners’ liability is limited to the amount they have invested in the company’s shares.
• Private company limited by guarantee: This structure is often used for not-for-profit organisations such as charities, where the members’ liability is limited to a pre-agreed guarantee amount.
• Limited liability partnership (LLP): An LLP combines a partnership’s flexibility with a company’s limited liability protection.

Decide which company type aligns best with your business goals and needs.

Choose a company name

When registering a limited company at Companies House, the name must be unique and cannot be the same as an existing company or trademark. It must end with the word "Limited" or the abbreviation "Ltd."

You can check the availability of a proposed name on the Companies House website.

Appoint directors, a PSC and a company secretary

Every limited company must have at least one director and person with significant control (PSC). These roles can be the same person. A person with significant control (PSC) owns or controls your company. They’re sometimes called ‘beneficial owners’.

You can also appoint a company secretary, although this is not a legal requirement by Companies House. Company Secretaries are usually responsible for more administrative tasks, such as filing documents with Companies House

The directors, PSC and company secretary will be registered with Companies House and their details will show on official company records.

Prepare the memorandum and articles of association

Two key documents that outline the company’s rules and the responsibilities of the directors are the articles of association and a memorandum of association.

The memorandum of association sets out the company’s name, registered office, and the business activities it will undertake. The articles of association cover the internal management and administration of the company.

Obtain a registered office address

Every limited company must have an official registered office address. This address will be used for legal documentation. This address does not have to be the same as your business address. Many people choose to use their accountant’s address, as it will be publicly available on the Companies House register.

Check what records you need to keep

You are required to have a separate business bank account for your limited company and keep accurate records such as:

• Records about the company itself, such as directors, share allocations, etc.
• Financial and accounting records, including company accounts etc.

Records must be kept for 6 years from the end of the last company financial year.

Register the company with Companies House

The final step is to register the company with Companies House, the UK’s registrar of companies. To do this, you must submit the necessary forms and documents, either online or by post. If all the paperwork is in order, the process online can typically take less than 24 hours.

Once registered, your company will be given a unique company number and will be officially recognised as a legal entity with Companies House.

Business finances

Setting up a business bank account

Limited companies must have a separate business bank account for all business transactions. This will keep your company’s finances separate from your personal funds.

Managing company finances

There are legal obligations to fulfil when running a limited company.

All businesses must keep accurate and up-to-date financial records. These records should include all taxable income and business costs. This allows an accountant to calculate taxable profits and complete a corporation tax return each year.

Part of the legal requirements for a limited company is the need to produce and submit a set of annual year end accounts for the business each financial year.

We strongly recommend you hire an accountant such as dns accountants to assist you with your financial and legal requirements of running a limited company.

Limited company taxation & directors taxation

As part of your responsibilities of running a limited company, you must ensure you fulfil all your legal responsibilities with both Companies House and HMRC for tax obligations. Running a limited company can have many tax advantages, but you must ensure you keep accurate records and pay tax on time.

Corporation tax

The company must register for corporation tax and file annual tax returns. Your company will pay corporation tax on all the business profits. Corporation tax rates range from 19% to 25%, depending on your level of taxable profits.

You must file a company tax return at HMRC each year and pay corporation tax due. When you complete your corporation tax returns, make sure you claim all available tax reliefs, such as Capital Allowances, Annual Investment Allowance and Research and Development tax credits.

Income tax and national insurance

If the company has employees, it must register for PAYE and deduct income tax and National Insurance Contributions from employees’ salaries.

As a limited company director, you can pay yourself a combination of salary and dividends to reduce your personal income tax bill. You will be liable to pay income tax on any salary and dividend tax on dividend income received from your company. Dividend income is taxed at a lower rate than income tax, so it can be a very tax-efficient way to extract profit from the company and pay yourself.

If you earn over a certain income level, you must also pay National Insurance Contributions. These National Insurance Contributions can be important to ensure you can claim future benefits such as the State Pension.

VAT

Depending on the company’s turnover, it may need to register for and charge Value Added Tax (VAT). If your total taxable turnover for the last 12 months goes over £90,000, it is mandatory to register for VAT.

Capital Gains Tax

Capital Gains Tax (CGT) is only payable by individuals when they sell assets. However, you may have to pay CGT if you make a profit (’gain’) when you sell (or ’dispose of’) shares or other investments, including business assets. Company directors will pay CGT on any gains made from the sale or disposal of business assets.

Use a qualified tax adviser

We recommend you use a qualified tax adviser to help you understand up-to-date tax rules, maximise tax benefits and reduce your tax liability. Here at dns accountants, our tax advisers are qualified to provide tax planning advice to individuals and companies. Professional advice can significantly reduce your personal and company tax bill.

Limited company formation for your business needs

Starting a business can be both daunting and exciting. Our company formation service simplifies the process for you and will get all the paperwork sorted for you, leaving you to run your business. We specialise in limited company formation, ensuring all legal requirements are met efficiently.

Our expert team guides you through every step, from company registration to legal and financial compliance, making it easy to establish your limited company and focus on growing your business. Let us help you get started today!

When establishing a business, submitting the right forms and information to Companies House is crucial in limited company formation. At dns accountants, our aim to take away the stress and streamline the company registration process when setting up a limited company in the UK with tailored company formation packages.

Director and shareholder services

When you choose our limited company formation services, we provide comprehensive support for the company, the directors and shareholders. We will simplify the process of forming a company while ensuring compliance with legal requirements.

Our services include:

• Guidance on appointing a company director.
• Assistance with shareholder agreements.
• Support in managing share capital.
• Advice on director responsibilities and liabilities.

Let us help you form a company that meets your business needs while providing clarity on legal requirements. With our expertise, you can focus on growing your business confidently.

Registered office address

When forming a company, having a registered office address is useful. This address serves as your official correspondence location and is publicly available via Companies House.

Benefits of a registered office address include:

• Compliance with legal requirements.
• Receiving important documents from Companies House.
• Enhancing your company’s credibility.
• Providing privacy for home-based businesses.

Take a look at our packages on offer to find the one that suits your needs.

For more help and advice on starting a limited company in the UK, contact us today at 033 0088 3616, email contact@dnsaccountants.co.uk or book a free consultation.

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