Limited Company Finance Notes

A director's loan account sounds technical, but most owner-managed companies have one. It is simply the running balance between you and your company: money you put in or take out that is not salary or dividend. The rules around it are strict, and getting them wrong triggers tax charges that surprise directors every year. How the account works When you pay company expenses personally or lend the company money, the company owes you, and the account is in credit. When you take money out beyond salary and dividends, you owe the company, and the account is overdrawn. The problems all live in that overdrawn territory. The 9-month repayment rule If your loan account is overdrawn at the company's year end, you have nine months and one day to repay it or face a Section 455 charge at 33.75 percent of the outstanding amount. The charge is repayable when the loan is cleared, but it is still cash out of the business and a red flag to HMRC. Diary the deadline the day the accounts are si...

Every UK limited company must keep a register of persons with significant control, and the information goes on the public record at Companies House. It is one of those compliance duties that is simple in theory and easy to get wrong in practice. Here is what directors need to know. Who counts as a PSC A person with significant control is anyone who holds, directly or indirectly, more than 25 percent of the shares or voting rights, can appoint or remove a majority of directors, or otherwise exercises significant influence or control over the company. Most small companies have one or two obvious PSCs (the founders). The complications start with joint holdings, corporate shareholders, and control exercised through agreements rather than shareholdings. What must be recorded For each PSC, the register must record their name, service address, residential address (not public), date of birth, nationality, and the nature of their control. The public register shows everything except the resident...

Dividend vs salary 2026/27: finding the optimal director pay mix   Why the mix matters more than the amount For the owner of a limited company, how you take money out matters almost as much as how much the business makes. Salary is taxed through PAYE and is deductible against corporation tax; dividends come from after-tax profits and carry their own tax rates. Get the mix right and you keep thousands a year that would otherwise go to HMRC. Get it wrong and you pay National Insurance you never needed to pay. With the main 2026/27 thresholds frozen, the maths is stable enough to plan around, though you should always confirm current rates at gov.uk before acting. Why salary still earns its place It is tempting to take everything as dividends, but salary does useful work. Salary up to the £12,570 personal allowance is free of income tax and, as a deductible expense, it saves corporation tax at 19% or 25% on every pound. A salary at or above the lower earnings limit also protects the...

Few things catch small company directors off guard like the directors' loan account charge. You take money out of the company for personal use, fully intending to put it back, and months later your accountant delivers the bad news: the company owes tax on a loan you have already repaid. That tax is the section 455 charge, and it is one of the most misunderstood corners of UK company tax. What a directors' loan account actually is A directors' loan account is simply the running record of money moving between a director and the company outside of salary and dividends. When the company owes the director money, the balance is in credit. When the director owes the company money, the account is overdrawn. An overdrawn balance is effectively an interest-free loan from the company, and HMRC treats it that way. The trouble starts when an overdrawn balance is still outstanding nine months and one day after the company's accounting year end. The s455 charge in plain terms If t...

By John Thomas, Senior Accountant Dividends are the most tax-efficient way for most company directors to take profit out of their business, but only if the paperwork is right. Every dividend a limited company pays must be properly declared and documented. Get it wrong, and what you thought was a dividend can be reclassified as salary or even an illegal distribution, with tax and legal consequences. The good news: the paperwork itself is simple, and takes minutes when you know what is required. Why the paperwork matters A dividend is not just money moved from the company bank account to your personal account. Legally, it is a distribution of the company's profits to its shareholders, and it must be formally declared by the directors. The paperwork proves three things: that the directors actually declared a dividend, that the company had sufficient distributable profits to pay it, and how much each shareholder received. This matters in two situations. First, HMRC enquiries: witho...

Every year, limited company directors must send Companies House two separate filings: the confirmation statement and the annual accounts. The names sound similar, they go to the same organisation, and they even use the same filing portal. Yet they do completely different jobs, on completely different deadlines. Mix them up and you can easily file one, forget the other, and learn about the mistake from a penalty notice. Here they are, side by side. The confirmation statement: checking the facts The confirmation statement, form CS01, is Companies House checking that its public register is still accurate. It confirms who the directors are, the registered office address, the share capital, the shareholders, the people with significant control, and the SIC code describing the business. It contains no financial figures at all. Think of it as the company's identity card: are the facts still right? The deadline runs from your incorporation date, not your financial year end. Your revi...

Every company director faces the same question: should I pay myself a salary, dividends, or a mix of the two? The two routes are taxed completely differently, and the most efficient mix depends on the current thresholds and rates. Here is the breakdown in plain terms. How salary is taxed Salary goes through PAYE and attracts both income tax and national insurance. For 2026/27 the personal allowance is 12,570 pounds, so the first 12,570 of salary is income-tax free. Employee national insurance is 8 per cent on earnings between 12,570 and 50,270 pounds, and 2 per cent above that. The company also pays employer national insurance at 15 per cent on salary above the secondary threshold of 5,000 pounds. The one consolation: salary and employer national insurance are both deductible against corporation tax, which softens the cost. The tax-efficient salary level For many directors the starting point is a salary of 12,570 pounds. At that level there is no income tax and no employee national...