Limited company 1

Running a limited company as a tradesperson

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Operating a limited company comes with some strict rules and regulations. Here’s what you need to know...

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Basic bookkeeping

Running a limited company involves some basic bookkeeping. Here are some fundamentals:

  • Keep reliable records - You need to keep comprehensive records of everything, including all invoices and expenditure.
  • Produce company invoices - Every invoice should have details about the company, including your full name, registered address and company number. If you charge VAT, you should include your VAT number too.
  • Save all receipts - You must keep all receipts somewhere safe for up to seven years.
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Financial fundamentals

As a company director you’re responsible for paying tax for yourself and those you employ. You must:

  • Pay taxes - All directors and employees need to pay income tax and make National Insurance Contributions.
  • Report payments - If your company operates a payroll, you must report to HMRC about all payments and deductions made and settle-up with HMRC.
  • Start saving - You’ll need to have enough cash set aside to pay your corporation tax bill at the end of the year. A good rule of thumb is to set aside between 10% - 20% of your turnover. You can keep the money in a separate business savings account, but don’t take it out of the business.
  • Check for CIS - Your company may need to register with the Construction Industry Scheme (CIS). As part of this scheme, you deduct cash from the payment you make to self-employed contractors to cover their tax and national insurance contributions, or if you’re working as subcontractor, the CIS will be deducted from your pay.
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Essential outgoings

One of the most important things you’ll probably want to do is find a great accountant who understands you, your business and your sector. Expect to pay around £100 a month for their services.

It may seem a lot to pay, but it’s usually money well spent. Ask around for recommendations and spend some time getting to know your accountant. You’ll want an accountant who’s approachable and accessible, and is happy to answer your questions.

Bookkeeping can be a stress and a strain, so we also recommend using a bookkeeper, or investing in online accounting software to help manage your invoices and expenses.

As well as these essential outgoings, you should also consider investing in insurance products to protect your business and your employees, including:

  • Public Liability Insurance
  • Professional Indemnity Insurance
  • Personal Accident Cover
  • Employers’ Liability Insurance

Operating as a limited company can require a little more day to day management than being a sole trader, but it’s all manageable as long as you’re organised and get the support you need.

Setting up your business