Finance Guide for Limited Company Directors
What a new UK director actually needs to do — bookkeeping, payroll, dividends, Corporation Tax and the filings that cannot slip.
A limited company runs on three pillars: a clean bookkeeping file, an extraction strategy (small salary + dividends + employer pension) and a filings calendar (confirmation statement, accounts, Corporation Tax, VAT, PAYE). Get all three on day one and the rest is detail.
A director's legal duties
Under the Companies Act 2006 you have seven statutory duties — act within your powers, promote the success of the company, exercise independent judgement and reasonable care, avoid conflicts of interest, not accept third-party benefits, and declare interests in transactions. In practice, the most common breaches come from mixing personal and company finances and from missing filings. Build the habits below and you avoid 95% of problems.
The first 30 days
Day-one director checklist
0/8 · 0%The most-missed item is Corporation Tax registration. HMRC needs to know within three months of the company actively trading — not just being incorporated. Penalties for late registration are small but the precedent of missing a HMRC deadline is best avoided in month one.
Salary, dividends and pension
A director's extraction plan normally combines salary, dividends and employer pension contributions. There is no universal “optimal” salary: the right comparison depends on your Employment Allowance position, other income, National Insurance record, company profits and pension objectives.
| Situation | 2026/27 salary consideration |
|---|---|
| Single-director company with no Employment Allowance | Compare £5,000 (the employer NI Secondary Threshold), £6,708 (the Lower Earnings Limit) and £12,570 (the Personal Allowance). Each has different employer-NI, qualifying-year and Income Tax consequences. |
| Company eligible for Employment Allowance | A salary nearer £12,570 may be worth modelling because eligible employers can offset employer NIC against the allowance; eligibility and the company’s wider payroll matter. |
| Director has other PAYE employment | Model the combined Income Tax and National Insurance position. A second salary can create different marginal rates and does not automatically use a second Personal Allowance. |
| Director needs a National Insurance qualifying year | Check the Lower Earnings Limit of £6,708 and the director’s complete National Insurance record rather than assuming a £5,000 salary achieves the intended result. |
| Multiple directors or employees | Employment Allowance eligibility and payroll structure can materially change the company-side cost, so model the wider workforce rather than one director in isolation. |
Dividends are paid from post-Corporation-Tax profit and are taxed at 10.75%, 35.75% or 39.35% in 2026/27 according to the shareholder’s band. Employer pension contributions can also be tax-efficient, but annual-allowance, carry-forward and affordability rules apply. Set the year's extraction strategy with a qualified adviser and review it when profits, payroll or personal income change.
Use the Director Salary & Dividend Calculator to compare illustrative salaries and dividends. It is a planning tool, not personalised tax advice, and does not replace advice on Employment Allowance, IR35, pensions or your wider tax position.
Bookkeeping and VAT
Cloud bookkeeping (Xero, FreeAgent or QuickBooks) connected to your business bank account is the practical default for a limited company. Compatible software is required for VAT records if you are VAT registered, while MTD for Income Tax applies to qualifying sole traders and landlords rather than limited-company Corporation Tax returns. Reconcile weekly, not monthly — the longer transactions sit untagged, the more memory you lose and the more guesswork creeps in. Use Dext or Hubdoc to scan and attach receipts automatically.
VAT registration is mandatory once 12-month taxable turnover crosses £90,000. Once registered, you submit a VAT return every quarter and pay the net amount one month and seven days after the quarter end.
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Corporation Tax and key deadlines
Corporation Tax is 19% on profits up to £50,000, 25% above £250,000 and tapered "marginal relief" in between. It is payable nine months and one day after the end of the company's accounting period. The accounts themselves must be filed at Companies House within nine months, and the CT600 with HMRC within twelve months.
1) Confirmation statement — due 14 days after the anniversary of incorporation; £50 fee. Miss it and the company can be struck off. 2) Statutory accounts — due nine months after year-end; £150 minimum penalty rising quickly. 3) Corporation Tax payment — due nine months and one day after year-end; interest accrues from day one of lateness.
Director's loan account
Any money you draw from the company that isn't salary, dividend or expense reimbursement sits in your director's loan account. If you owe the company more than £10,000 at any point in the year, HMRC treats the benefit as taxable. If the account is overdrawn at the year-end and not repaid within nine months, the company pays an extra 35.75% tax (Section 455) — refunded when you repay, but it ties up cash for years. Keep the DLA in credit or reset it monthly.
The annual cycle
Build a single calendar with: monthly payroll runs and pension contributions; quarterly VAT returns; annual confirmation statement; year-end stock-take and accruals; annual accounts and CT600. An accountant manages most of this, but the director is legally responsible. Block 60 minutes on the first working day of each month to review management accounts and cash position.
Frequently asked questions
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Information on this page is general guidance for UK small businesses and is not financial, tax or legal advice. Tax rules, allowances and product terms change. Always check current information with HMRC, Companies House or a qualified professional before making decisions.