Running a Limited Company

Running a Limited Company

Company Setup

Now your company has been formed, it's imperative to have a look through our checklist to make sure you've got everything you need to be compliant. 

Company Directors are as you originally requested, and at least one Director on Companies House.

Company Secretary, although small businesses do not require one, it's important to check that your requested Secretary is registered.

If you no longer wish to have a company secretary, complete a TM02 form and post to Companies House.

Registered office - this is the legal address for your company. You can choose to have this at one of our offices if requested.

Shares - the allocation of shares is normally done when the company was formed.

Bank Account

Now your company has been formed, we need to begin looking at opening a business bank account, unfortunately, a lot of banks will offer you the world without giving you any value.

Luckily, we have established relationships with private banking firms for businesses within the UK and overseas. We can offer you a comprehensive list of options with accounts opening within 5 working days. 

Contact us today to learn more

PAYE/NIC

If you intend to pay your employees a salary, then you will need to set up (PAYE) with HM Revenue & Customs (HMRC). RHJ Accountants offers this registration service as free of charge to all of our new clients.

HMRC will allocate a reference code to you and your company will be required to deduct tax and NI from any salaries paid.

There are many PAYE responsibilities you have as director, the main ones including

1. Deduct & pay to HMRC.

2. File Monthly PAYE returns in Real Time to HMRC.

3. Report expenses paid to directors and employees by 6th July for the tax year.

Don't get caught out, at RHJ, we help you keep on top of this. Contact us today to join us.

 

VAT

VAT is a tax that is normally added to the value of your fees, currently, the rate is set at 20%. So, if the invoice for your services is £2,000 you would add £400 (£2000 x 20%), making the total invoice £2,400.

You must register for VAT if the annual turnover of the company will exceed £82,000 (2016/17) – although we would recommend that you register, even if your turnover will not reach this threshold. A benefit is the VAT Flat Rate Scheme – this is a scheme to simplify the operation of VAT and, in most cases will save you money. The typical annual savings are in the region of £1,500 to £3,000. To join the scheme, your turnover should not exceed £150,000 per annum.

RHJ Accountants offers this registration service free of charge to all new clients.
There are several VAT responsibilities you have as a director, the main ones being:
1. Complete a VAT return every 3 months. This must be now done electronically, giving you more time and if you opt to pay by DD, more time to pay too.

2. The return is due approximately five weeks, following the return period. So, if the return is up to 31st December, the return is due by 7th February.

3. Pay any VAT owing, this is also due at the same time as the VAT return, so you have at least 5 weeks after the return period to make the payment. would pay NIC at the rate of 13.8% on any salary above £8,060.

Corporation Tax

Soon after your company has been formed at Companies House, HMRC will issue a form ‘Corporation Tax - New Company Details’ – this will be sent to the registered office.

By completing this form, HMRC will register you and your company for Companies House

Corporation Tax is currently charged on profits at 20% for small companies. Company profits are generally calculated by taking away the business expenses from the final turnover.

RHJ Accountants offers this registration service free of charge for all our new clients.

There are many Corporation Tax responsibilities you have as a director, the main ones include.:

Complete a Corporation Tax Return every year.
Pay any Corporation Tax due - this is payable 9 months after the period end date.

There are numerous penalties for being late with your corporation tax. 

Contact us today if you're falling behind.

Insurance

There are three types of insurance that you need as a business operating in the UK.

Employer Liability Insurance which covers the employer against claims by an employee for damages.

Public Liability Insurance which insures you against injury or death to third parties and damage to third party property whether intellectual or physical property.

Professional Indemnity Insurance which covers you against any claims made against you, for example, if your client suffers a financial loss as a result of your negligence.

If you require insurance, please contact us and we will introduce you to industry leaders providing support to businesses like yours.

Expenses

A significant portion of business owners and directors overlook what type of expenses that they can claim.

General rule permits that all expenses must be considered "wholly and exclusively for the business and can include: 

Salaries
National Insurance Contributions (Employers)
Employer pension contributions
Business travel (including mileage and public transport)
Accommodation whilst away from home on business
Subsistence whilst working away from home
Accountancy Fees
Mobile telephone costs
Postage and stationery
Home office costs
Business computer equipment and software
Internet connection
Technical books and publications

Equate to an annual salary of £12,071. Paying an extra £4,375 as salary will mean that you will pay PAYE of £526 and employees NIC of £518, adding in the employer NIC of £604 makes an extra £1,648 payable to HMRC.

However, paying a higher salary would attract Corporation tax relief of £996 so the net extra taxes payable would be £652 (526+518+604-996).

Clearly, there would have to be good reasons why you would opt to pay an additional £652 in tax each year.

You now need to decide what annual salary you would like to be paid from your company. The most tax efficient salary would be one set at the earnings threshold which is £7,956 for 2014/15 (prorated if you have become a director part-way through the tax year). Before confirming this you should take note of the following considerations: The above assume that there is no written contract of employment in place between yourself and your Company. If you do the National Minimum Wage regulations will apply, this is currently set at £6.70/hour and based on a 37.5 hour/week he would equate to an annual salary of £13,065.

The above assume that there is no written contract of employment in place between yourself and your Company. If you do the National Minimum Wage regulations will apply, this is currently set at £6.70/hour and based on a 37.5 hour/week he would equate to an annual salary of £13,065.

Do you make personal pension contributions? If so, you will only get tax relief up to the value of gross salary paid, this issue may, however, be solved by making pension contributions through the company;

Do you hold any insurance policies linked to the level of salary paid? (eg. IR35 insurance) If so, you may need to pay yourself a salary above a certain level for the insurance to be valid.

You must earn in excess of £5,824 this tax year to earn a qualifying year for state pensions.

Dividends

Dividends are a portion of post-tax profits paid to the shareholders, the owners of a Limited Company

A new dividend allowance has been introduced which means that individuals first £5,000 of dividends are tax-free.

Over and above this £5,000 the dividend income is taxed as follows:

 If you have any unused personal  allowance (£11,000 for 16-17) then   that  element is tax-free 

Any dividends in the basic tax band   (up to £43,000 for 16-17) attract a tax   charge of 7.5% 

Dividends above the basic tax band   are charged at 32.5% 

Additional rates of tax will apply to the upper tax band (£150,000 for 16-17)

Before declaring a dividend the company should ensure that there are profits available to support the dividend payment. Once this has been satisfied the company holds a board meeting to declare the dividend.

RHJ Accountants will calculate the profit and prepare the dividend vouchers for you.

Salary

Assuming that the IR35 rules do not apply to your contract, the two main options are whether to pay at the level of the tax & NIC free allowance (£7,956 for 2014/15) or a salary at the level of the National Minimum Wage (NMW).

IR35

IR35 was introduced in April 2000 and aims is to increase the tax paid by people who set up their own company instead of working as a normal employee.

Tax Returns

You will be expected to complete a personal Tax Return each year as a director.
The Tax Return will include details of all your income, such as salaries, interest, dividends etc. Allowable deductions such as pension and charity contributions are also declared.
The Tax Return is normally due with HMRC by 31st January after the end of the tax year, this is also the date any outstanding taxes are due.
RHJ Accountants can complete the tax return for you as part of our service, provided we receive it by 31st October after the end of the tax year and it is relatively straight forward, failing that, our normal fee for clients is £90 with no Added VAT per return. The charge may also apply if you join part way through the tax year.
Tax Returns are normally issued by HMRC in April each year if you have not been issued with one, or an advice letter saying that you need to complete one you should contact HMRC to request one.