Running a limited company involves learning the duties of a director, complying with Companies House and HMRC rules, and fulfilling ongoing obligations as a company director.
In this guide, we’ll outline what legal responsibilities and administrative requirements you need to follow as a limited company director.
Let’s start by learning the difference between company directors and shareholders.
Shareholders and Ownership
Shareholders own a limited company by buying one or more shares. Since they invest, they do not participate in its management. However, they can vote on important decisions such as appointing directors.
Directors are employees chosen by shareholders to run, manage and make strategic decisions for the limited company. While the roles are completely different, a single person can be both a shareholder and director of a company at the same time.
Get detailed insight into a limited company and its shares in the following guides.
Directors and Their Responsibilities
Under the Companies Act 2006, these are the core duties and responsibilities of limited company directors:
- Perform statutory filing and reporting obligations.
- Act within their powers.
- Promote the company’s success.
- Make independent decisions.
- Exercise reasonable skill, care, and diligence.
- Avoid conflict of interest.
- Reject benefits from third parties.
- Declare interest in proposed transactions or arrangements.
They can outsource their work to employees (such as accountants), but remain accountable and responsible for accounts, records, and the overall performance of the company.​
Learn the key responsibilities of directors and how their salaries are structured
Companies set up for profit are built to make money. So once that money starts building up, the next question is simple. How do you take it out? Next, let’s look at the main ways you can extract money from a limited company.
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How To Take Out Money From a Limited Company?
When it comes to withdrawing money from a limited company, it is important to use tax-efficient methods rather than simply withdrawing funds. These typically include paying yourself a director’s salary, issuing dividend payments, taking a director’s loan, or claiming legitimate business expenses.
If you’re running a limited company and want to withdraw funds, our in-depth guide will help you explore the fastest and most efficient way to do so.
Company Information You Must Report to Companies House
Companies House is the UK’s registrar of companies, responsible for managing company incorporation, public records, and transparency.
The directors of the company are responsible for reporting certain information to Companies House. This information includes:
- Details of company directors, company secretaries, new appointments, resignations and changes to their personal details
- Change of company name, registered office address (must be in the same UK part) and the company’s registered email address
- Changes to your Information about people with significant control (PSC) or any changes to them (you need to report them within 14 days)
- Details and any changes to your company’s share structure and any new mortgages it has or mortgages it has paid off
- Changes to accounting reference date and business contact details, like name, address, business name or business address
You can report these changes to Companies House by using the Companies House online service or by filling in and sending paper forms. Some changes may need you to pass a resolution.
You may also need to tell HM Revenue and Customs (HMRC).
Company and Accounting Records You Must Keep
A limited company must keep proper company, financial and accounting records with a separate bank account to keep its finances separate. Limited company directors can hire a tax expert or accountant to help with tax-related matters.
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Tax Filing and Annual Accounts?
If you are a new director, you can hire a specialist to help with accounting and tax matters.
What Company Records to Keep
These records should be maintained by a limited company. It should include the details of:
- Company directors, secretaries and shareholders
- Result of any shareholder’s vote and resolution
- Pledges that a company will make the payments in case a loss (indemnity)
- Transactions made while buying shares of the company
- Mortgages and loans that a company gets against the assets
Note that you must tell Companies House if you keep the company records at an address other than the registered office.
Discover the secret to limited company financial success
Register of People with Significant Control (PSC)
You also need to keep a register of PSC, and it must include details of PSC with:
- Over 25% shares or voting rights in your company
- can appoint or remove a majority of directors
- can influence or control your company or trust
If there are no people with significant control, you still need to keep the record.
​Accounting Records You Must Keep
Here are the accounting records you are required to keep:
- Total money received and spent by the company
- Details of total assets owned by the company
- Debts the company needs to pay or receive
- Stocks owned by the company at the end of the financial year
- The stocktakings the company uses to figure out the stock figures
- All goods bought and sold by the company.
- To whom the goods are sold and bought from (unless you run a retail business)
In addition, you are also required to keep records of everything needed to prepare and file your annual accounts and Company Tax Return.
HMRC can levy a £3,000 penalty, or you can be disqualified as a company director, if you don’t keep accounting records. Sometimes you need to keep records for 6 years, depending on the company’s circumstances.
In case your documents are lost, destroyed or stolen, you need to try to recreate them, inform the corporation tax office and include these details on your Company Tax Return.
Confirmation Statement
Limited companies need to ensure that the information Companies House holds about their company is accurate each year. This annual document is called a confirmation statement (previously an annual return).
Checking Details about Your Company
In this document, you need to make sure to check the following information:
- Details about your directors, secretaries, your registered office address and the address where you keep your records
- If your company has shares, it needs to check the statement of capital and shareholders’ information.
- Your SIC code (the number that tells your business activities)
- Your ‘people with significant control (PSC) register’
You can send your confirmation statement online for £50, or by post for £ 110 and report changes to your statement of capital, the trading status of shares, shareholder information, and SIC codes at the same time.
Your Confirmation statement is due either 1 year after your company’s incorporation or on the date you file your last confirmation statement. You are given 14 days after the due date to submit it.
If you do not send your confirmation statement on time, you may be fined up to £5,000, and your company may be struck off.
Explore more about confirmation statement
Signs, Stationery and Promotional Material
When you are involved in marketing and advertising for your company, you need to follow these rules:
Signs
It is necessary to display a sign bearing your company’s name at your registered office address and at any locations where it conducts business.
Stationery and Promotional Material
You are required to include the name of your company on all your documents publicly and in letters. You need to include these details in your company’s documents:
- the company’s registered number
- Its registered office address
- Where the company is registered
- The fact that it’s a limited company
Costs of Running a Limited Company
If you are considering setting up a limited company, you need to be aware of the costs involved. Explore the types of costs you might incur to run a limited company.
Setup Costs
Currently, Companies House charges you £100 to register your company online. Postal registration costs £124. Registration is usually completed within 24 hours. You can also register your company on the same day for a fee of £156.
Explore limited company setup
Running Costs
You need to maintain sufficient working capital to manage day-to-day operations. The following are the common costs of running a limited company:
Accountancy Fees
Accountancy fees are incurred on limited companies, typically charged by limited company accountants for bookkeeping, tax planning, correspondence with Companies House or HMRC, and updating the company’s records. This fee can be fixed or variable.
Sometimes accountants charge a bit more for their office address, bookkeeping software, or personal taxes. However, if you factor in the time and hassle involved, hiring an accountant seems a cost-effective option. With their expertise, they can reduce the administrative burden of managing a company’s finances.
In-depth guides on
Business Insurance
Limited companies need to insure their assets and wealth by purchasing business insurance. The type of insurance a business buys depends on its nature. Common types of insurance include professional indemnity, public liability, and employers’ liability.
The cost of insurance varies by coverage type and the nature of your business. It can start from £220 per year, and it can be more expensive, especially if you add extras like cyber security or legal expenses insurance.
Find out
Company Bookkeeping Software
Companies keep their records safe and up to date by either using in-house software or hiring an accountancy firm to provide it. Some firms include bookkeeping in their packages, while others charge extra for it.
Explore the top bookkeeping and accounting software
Company Expenses, Taxes, and Fines
HMRC is the UK’s tax authority with responsibilities to handle tax collection, the enforcement of taxes, and manage state benefits.
HMRC considers travel, parking, logistics, marketing, training fees, office equipment, postage, office supplies, utilities, and entertainment as the company’s expenses. Some of these expenses are tax-deductible. The company also needs to pay corporation tax, VAT, and other applicable taxes.
Learn more about VAT, Taxes and Payroll at:​
Companies House Confirmation Statement
Companies House charges an annual fee of £50 (by post is £110) to confirm the company’s details. It is a mandatory cost.
Key Deadlines You Must Not Miss
- Annual Accounts: File annual accounts with Companies House within 9 months after your company’s financial year-end.
- Corporation Tax Payment: Pay Corporation Tax to HMRC within 9 months and 1 day after the end of the accounting period.
- Company Tax Return (CT600): File with HMRC within 12 months after the accounting period ends.
- Confirmation Statement: File with Companies House within 14 days of the end of each 12-month review period.
- VAT Returns (if applicable): Submit and pay within 1 month and 7 days after the end of the VAT quarter.
- PAYE Deadlines: Report Full Payment Submission (FPS) on or before payday and pay HMRC by the 22nd of the following month (19th by post).
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Conclusion
Running a limited company comes with many responsibilities for a director under the Companies Act 2006. Limited company directors should maintain accounting records, prepare and file annual accounts, submit confirmation statements and pay the taxes on time to HMRC. Complying with these obligations helps avoid penalties, extra charges and disqualifications. By understanding these responsibilities, you can protect yourself and your company to achieve business growth.
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