Question 1

What is Corporation Tax and when do I pay it?

Accepted Answer

Corporation Tax is a tax on your company's profits. The current main rate is 25% for profits over £250,000, with a small profits rate of 19% for profits up to £50,000 (marginal relief applies between these thresholds). You must pay Corporation Tax 9 months and 1 day after your accounting period ends, and file your CT600 return within 12 months.

Question 2

How do I set up PAYE for my limited company?

Accepted Answer

Register as an employer with HMRC before your first payday. You can do this online through the Government Gateway. Once registered, you'll receive your PAYE reference number and Accounts Office reference. You'll then need to run payroll software to calculate tax and National Insurance, and submit RTI (Real Time Information) reports each pay period.

Question 3

What's the most tax-efficient way to pay myself as a director?

Accepted Answer

Most directors use a combination of salary and dividends. A common approach is to pay a salary at the National Insurance threshold (around £12,570) to maintain state pension contributions, then take additional remuneration as dividends. Dividends are taxed at lower rates than salary and don't attract National Insurance. However, you can only pay dividends from company profits.

Question 4

When do I need to register for VAT?

Accepted Answer

You must register for VAT if your taxable turnover exceeds £90,000 in any 12-month rolling period, or if you expect it to exceed this threshold in the next 30 days alone. You can also register voluntarily below this threshold to reclaim VAT on business purchases. Consider the Flat Rate Scheme if your turnover is under £150,000.

Question 5

What are my legal responsibilities as a company director?

Accepted Answer

Directors must act in the company's best interests, exercise reasonable care and skill, avoid conflicts of interest, and not accept benefits from third parties. You must file annual accounts with Companies House, submit a confirmation statement, maintain statutory registers, and keep proper accounting records. Failure to meet these obligations can result in penalties or disqualification.

Question 6

What expenses can I claim through my limited company?

Accepted Answer

You can claim business expenses that are 'wholly and exclusively' for business purposes. This includes office costs, travel expenses (not regular commuting), professional fees, training relevant to your business, equipment, marketing costs, and business insurance. Keep receipts and records for at least 6 years. Some expenses have specific rules, like entertainment (not usually deductible) and working from home (use of home calculation).

Question 7

How do I file annual accounts and a confirmation statement?

Accepted Answer

Annual accounts must be filed with Companies House within 9 months of your accounting year-end. They include a balance sheet, profit and loss account, and notes. The confirmation statement (previously annual return) confirms your company details are up to date and must be filed at least once every 12 months, with a £50 filing fee.

Question 8

What happens if I miss HMRC or Companies House deadlines?

Accepted Answer

Missing deadlines results in automatic penalties. Late filing of accounts incurs Companies House penalties from £150 to £1,500 depending on delay. Late CT600 returns attract penalties starting at £100, increasing the longer it's overdue. Late payment of tax incurs interest and potential surcharges. Set up reminders well in advance of all deadlines.

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