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...
There are many benefits to forming a Ltd company, not least the fact that if your limited liability company fails, you won’t be personally responsible for its debt. However, those benefits come with certain responsibilities. As a Ltd company director, you must ensure your company maintains accurate accounts and basic business records.
Every year you have to:
- File an annual return - You must provide details to Companies House about your business. The annual return includes essential information such as directors’ details, current shareholders, the share capital and the registered business address. This must be submitted within 28 days of the anniversary of when the company was incorporated, or the date the last return was made.
- File annual accounts - As a director, you’re responsible for ensuring that your accounts are filed with Companies House on time, every time. Your accountant will manage the process for you, but it’s your job to ensure they do. If they’re late, you’ll face any fine (not your accountant!).
- Submit a Corporation Tax Return - You’ll need to tell Companies House how much corporation tax you owe and pay it on time. You’ll have up to nine months after the end of your tax year to pay.
You can find a full list of responsibilities on the Government’s website.
If you’re registered for VAT, you’ll have to prepare a quarterly VAT return and pay it.
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.
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.
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.