Set up a limited company

A limited company is a separate legal entity from its owners. Your personal assets are protected from business debts (limited liability). You'll need to register with Companies House and comply with ongoing filing requirements.

IMPORTANT: Identity verification required from November 2025

From 18 November 2025, all directors and People with Significant Control (PSCs) must verify their identity with Companies House before appointment. This is a legal requirement - you cannot register directors without verification.

Start early: Complete identity verification before starting company registration. Verification is instant if your details match government records, but allow time for any issues.

What you need to set up

Registration process

Registration fees

• Standard online: £100
• Same-day incorporation: £78
• Paper application: £71

Documents required

• Form IN01: Application to register a company
• Memorandum of Association: Constitutional document stating initial subscribers
• Articles of Association: Rules governing how the company operates (use model articles or create bespoke)

What you'll receive

• Certificate of incorporation with your company number
• Your company will appear on the Companies House register
• You can then register for Corporation Tax with HMRC

Ongoing compliance requirements

Annual filings

• Confirmation statement: £50 online, due annually (confirms company details are up to date)
• Annual accounts: Due within 9 months of year-end (first accounts may have 21 months)
• Corporation Tax return (CT600): Due within 12 months of year-end, filed with HMRC

Statutory registers

You must maintain registers of:

• Directors and their service addresses
• Shareholders (members)
• People with Significant Control (PSCs) - anyone with >25% shares/voting rights
• Charges (mortgages and security on company assets)

From November 2025: Mandatory identity verification for all directors and PSCs.

Company size classifications and what they affect

Your company's size classification determines whether you need a statutory audit, what accounts you can file, and whether IR35 off-payroll rules apply to contractors. From April 2025, thresholds are increasing significantly, meaning more companies will qualify as 'small' and benefit from reduced compliance requirements.

Directors' statutory duties

Under the Companies Act 2006, directors have seven key duties:

1. Act within powers: Only use powers for their intended purpose
2. Promote success of the company: Consider long-term consequences, employees, suppliers, customers, community
3. Exercise independent judgment: Make your own decisions, don't blindly follow others
4. Exercise reasonable care, skill, and diligence: What would reasonably be expected of someone in your role
5. Avoid conflicts of interest: Cannot put personal interests above company interests
6. Not accept benefits from third parties: Cannot accept benefits that compromise loyalty
7. Declare interest in transactions: Disclose any personal interest in company transactions

Breach consequences: Personal liability, derivative claims by shareholders, disqualification from being a director (2-15 years).

Tax for limited companies

Corporation Tax (2026/27)

• Small profits rate: 19% on profits up to £50,000
• Main rate: 25% on profits over £250,000
• Marginal relief: Gradual increase from 19-25% for profits £50,000-£250,000

Optimal salary and dividends strategy

Most owner-directors take a combination of salary and dividends to minimise tax:

• Optimal salary: £12,570 (Personal Allowance) - no Income Tax, minimal NI
• Dividends: Remaining profits taken as dividends - no NI, lower tax rates (8.75%/33.75%/39.35%)
• Dividend allowance: First £500 of dividends tax-free

Director's loan account

If you borrow from your company:

• Loans over £10,000 trigger benefit in kind (taxable)
• Loans not repaid within 9 months of year-end: 33.75% Section 455 tax due (increasing to 35.75% for loans made from 6 April 2026)
• Interest must be charged at HMRC's Official Rate (3.75% from 6 April 2025) or it's a taxable benefit

Dividend tax rates in detail