Starting a Limited Company - What Nobody Tells You

Bringing home a new baby comes with excitement—and a mountain of unknowns. Starting your own limited company is no different. It’s a milestone moment that can feel overwhelming without guidance. There’s no instruction manual, but the decisions you make in the early days matter. Here are some practical, often overlooked tips to help you get started the right way.

Here are our Top Ten Starter Tips...

1. Form Your Company Yourself - No Need to Overspend

Contrary to popular belief, you don’t need to pay a high-end accountancy firm to set up your company. You can easily form a limited company online using a reputable formation agent. These services are affordable, simple, and usually guide you step-by-step through the process.

Save the accountants for the strategic advice and annual filings—not the initial paperwork.

2. Watch Out for Your Company UTR

Once your company is incorporated, HMRC will send you a Unique Taxpayer Reference (UTR). This number is essential for filing your company’s tax return and communicating with HMRC. It usually arrives by post within a couple of weeks—don’t lose it!

3. Know When You Go From Dormant to Trading

Initially, your company is considered dormant. That status changes the moment you begin trading—such as issuing invoices, signing contracts, or making purchases. From this point, you’ll need to:

File annual accounts within 9 months of your company’s financial year-end
Consider changing your accounting year in the first year to better suit your business cycles

Keep in mind that HMRC and Companies House don’t necessarily view trading activity the same way, so track all financial transactions carefully.

4. Set Up a Business Bank Account Immediately

Never use your personal bank account for company transactions. Doing so can lead to:

Complicated bookkeeping
Difficulty separating personal and business expenses
Potential HMRC scrutiny

Open a corporate account as soon as your company is registered. It builds credibility and ensures a clean financial trail.

5. Don’t Skip the Annual Confirmation Statement

Every UK limited company must file a confirmation statement annually—regardless of whether it’s trading. This document confirms your company details (like directors, shareholders, and registered office address).

Failure to file on time can result in:

Financial penalties
The company being struck off the register

It's a simple task that’s easy to overlook—set a calendar reminder or use an automated filing service.

6. Register for Corporation Tax Promptly

Once your company starts trading, you must register for Corporation Tax with HMRC within three months. This includes any buying, selling, advertising, or employing.

Late registration can lead to penalties, even if your company isn’t profitable yet.

7. Understand Your Legal Responsibilities as a Director

As a director, you have specific statutory responsibilities, including:

Keeping proper accounting records
Filing accurate annual accounts and tax returns
Avoiding conflicts of interest

These duties are legally binding and apply even if you're the only person involved in the business.

8. Use Cloud Accounting Software from the Start

Good record-keeping is critical, and using cloud-based accounting tools like Xero, QuickBooks, or FreeAgent can simplify everything from the beginning.

These platforms allow you to:

Track income and expenses in real-time
Reconcile transactions directly from your bank
Generate reports and prepare for VAT or tax filings with ease

Some banks even offer free trials or discounts for new business customers.

9. Consider VAT Registration - Strategically

The VAT registration threshold is £90,000 (2025). You must register if your turnover exceeds this, but you can also register voluntarily before reaching the threshold.

Why register early?

If your clients are VAT-registered, they can reclaim the VAT you charge
You can reclaim VAT on start-up expenses

However, VAT registration brings more paperwork and responsibilities, so weigh the pros and cons or consult an advisor before proceeding.

10. Plan for Tax From Day One

Many new business owners fall into the trap of spending everything they earn, forgetting that tax still needs to be paid. Your limited company will owe:

Corporation Tax on its profits
Potential PAYE and dividend tax depending on how you draw income

Best practice? Set aside around 19–25% of your profits in a separate account to cover Corporation Tax. And always issue proper paperwork for dividends, supported by board minutes and profit availability.

Final Thoughts

Starting a company is exciting, but it can quickly become a headache without the right systems and knowledge in place. These tips aim to demystify the process and help you stay compliant from the outset.

Make informed decisions, keep your records clean, and don’t hesitate to seek professional advice for tax strategy or growth planning. The right start can make all the difference.

If you’d like some advice get in touch with us today.