There are more than 5.5 million private limited companies registered at Companies House as of 2025. (Source: Companies House annual report). This structure is preferred by most of the business owners in order to protect their personal assets. When you mix both your personal and business debts it will create a legal barrier when you set up a limited company.
A limited company is considered a separate legal entity which is registered at Companies House. In simple terms, this means that the company owns all assets and is responsible for its own debts. Keeping accurate accounts isn’t just good practice it’s a legal requirement if you run a limited company.
Note : This article was originally published in 2 Dec 2019 and last updated on 15 March 2026 to reflect the Companies House identity verification requirement , updated filing fee changes, and the closure of the free HMRC/Companies House portal.
Key Takeaways
Keep business and personal finances completely separate from day one
Claim only wholly and exclusively business expenses – nothing personal
Corporation Tax is due 9 months and 1 day after your year end – don’t miss it
Cloud accounting software keeps you MTD-ready and saves time year round
A good accountant saves you more than they cost – tax savings, compliance, growth
Essential banking and financial management
1. Open a business bank account immediately
Owning a separate bank account is the topmost requirement of a limited company. This is because your company is legally separate from you as an individual. You have to open this account as soon as Companies House confirms your registration.
Why is it important:
- Helps with changing tax rules.
- Legal requirement for financial separation.
- Makes accounting much simpler.
2. Keep personal and business finances separate
Always avoid mixing of your personal expenses with business spending. Using your business account for personal purchases creates problems with tax. You must keep everything separate to avoid problems with HMRC.
Best practices:
- Keep detailed records of all transactions.
- Use only business cards for company purchases.
- Pay yourself through salary or dividends.
| Transaction Type | Use Business Account | Use Personal Account |
|---|---|---|
| Office supplies | ✓ | ✗ |
| Business travel | ✓ | ✗ |
| Grocery shopping | ✗ | ✓ |
| Personal bills | ✗ | ✓ |
3. Avoid using personal money for business expenses
Claiming back business expenses from personal funds is possible. But it will create unnecessary paperwork and problems. A better solution for this is to get a business debit or credit card.
Benefits of business cards:
- Cleaner financial records.
- Expense tracking becomes easy.
- Better cash flow management.
4. Never use company credit cards for personal purchases
The use of business cards is for business expenses only. When it used for personal spending, it may give rise to tax issues and even can complicate your accounts. Always pay off credit cards monthly to maintain good credit ratings
VAT Registration Requirements
You must register for VAT if your turnover reaches £90,000 over any rolling 12-month period. This threshold increased from £85,000 in April 2024.
Note : The VAT registration threshold has been frozen at £90,000 and the deregistration threshold at £88,000 until at least 31 March 2026. The government has not confirmed a change for 2026/27 at the time of writing.
VAT Registration Timeline:
- Monitor your turnover monthly
- Register within 30 days of crossing the threshold
- Consider voluntary registration for smaller businesses
VAT schemes available in 2025
Flat rate VAT scheme benefits:
- Available for businesses with turnover up to £150,000.
- Simplified accounting process.
- Potential tax savings depending on your sector.
- 1% discount in your first year.
| Business Type | Flat Rate % | Standard Rate |
|---|---|---|
| Retail | 4% | 20% |
| Consultancy | 14% | 20% |
| Construction | 9.5% | 20% |
Corporation tax and dividends
Only declare dividends when your company has sufficient profits. Illegal dividends result in penalties and potential director liability.
Key dividend rules:
- Check retained profit before declaring.
- Issue dividend vouchers.
- Maintain proper documentation.
Companies house requirements 2025-26
Filing deadlines
Private companies must file annual accounts within 9 months of their year-end. Corporation Tax returns are due within 12 months of the accounting period ending.
Annual Compliance Checklist:
- Annual accounts (9 months).
- Confirmation statement (yearly).
- Corporation Tax return (12 months).
- Corporation Tax payment (9 months + 1 day).
Companies House Fees (New from February 2026)
New filing fees from 1 February 2026: Companies House increased its fees to fund the new identity verification system. Incorporation now costs £100 (was £50). Confirmation statement filing is £50 (was £34). Voluntary strike-off is £13. These fees apply to digital filings
New requirements for 2025
From 18 November 2025, identity verification with Companies House became compulsory for all directors and Persons with Significant Control (PSCs). New directors must verify before appointment. Existing directors have until 18 November 2026 – but must verify before their next confirmation statement filing, whichever comes first.
Verification is free and takes around 2–3 minutes via GOV.UK One Login (gov.uk/one-login) using a passport or driving licence. Your accountant can also verify on your behalf as an Authorised Corporate Service Provider (ACSP). Failure to comply could mean you cannot file your confirmation statement, and persistent non-compliance may result in fines or criminal prosecution.
From 1 April 2026, the free HMRC/Companies House joint filing portal (CATO) closes. All companies must use commercial software to file their Corporation Tax returns from this date. For annual accounts, software-only filing becomes mandatory from 1 April 2027
If you currently self-file for free using the HMRC web form, you need to move to paid accounting software before 31 March 2026. Download your previous returns from the portal before it closes. Software options include Xero, QuickBooks, FreeAgent, and Sage.
Cost-saving accounting strategies
Digital accounting tools
Modern accounting software can save time and money. These tools help track expenses, generate invoices and prepare tax returns automatically.
Benefits include:
- Automated bookkeeping.
- Real-time financial reporting.
- Easy VAT return preparation.
Professional accounting services
Consider hiring an accountant for difficult tax issues. They can identify tax savings and make sure that you stay current with changing regulations.
When to hire an accountant:
- Annual turnover exceeds £100,000.
- Complex business structure.
- Multiple income streams.
Common accounting mistakes to avoid
Record keeping errors
Keep all receipts and invoices for at least 6 years. Digital storage is acceptable but ensure backups exist to avoid problems in future.
Missing deadlines
Late filing results in automatic penalties. Set up calendar reminders well before deadlines.
Structure of penalty:
- Penalty: Up to 1 month late: £150
- Penalty: 1–3 months late: £375
- Penalty: 3–6 months late: £750
- More than 6 months late: £1,500
- Penalty doubles if accounts are late in 2 consecutive years
Incorrect expense claims
Only claim correct business expenses. Personal costs cannot be claimed even if paid through the business account.
Key takeaways
Running a limited company involves difficult accounting and tax requirements. Professional accountants can help ensure compliance while maximising efficiency in tax.
For expert accounting services as per your limited company needs, consider consulting with qualified chartered accountants who understand the latest 2025-26 regulations.
Talk to DNS CloudCo
Do you need an accountant in Milton Keynes for your limited company? Contact DNS CloudCo Chartered Management Accountants.
FAQs
What happens if I miss the VAT registration deadline?
You must register within 30 days of crossing the £90,000 threshold. Late registration can result in penalties and interest charges.
Can I change my company year-end date?
Yes, but this requires filing a shortened or extended set of accounts. Consider the impact on tax planning before making changes.
How often should I review my company finances?
Review your accounts monthly at minimum. Weekly reviews are better for active businesses with regular transactions.
What expenses can my limited company claim?
Legitimate business expenses include office rent, equipment, travel, and professional fees. The expense must be wholly and exclusively for business purposes.
Do I need separate insurance for my limited company?
Yes, your company needs its own insurance policies. Personal insurance doesn’t cover business activities or premises.
When should I consider paying myself dividends vs salary?
This depends on your total income, tax rates, and cash flow needs. Professional advice is recommended for tax-efficient extraction strategies.
What records must I keep for HMRC?
Keep all business receipts, invoices, bank statements, and expense records for 6 years minimum. Digital copies are acceptable with proper backups.
Can I run my limited company from home?
Yes, but consider business rates, insurance, and mortgage implications. You may be able to claim home office expenses.
Do I need to verify my identity with Companies House?
Yes. From 18 November 2025, all directors and PSCs must verify their identity with Companies House. New directors must verify before appointment. Existing directors must do so before their next confirmation statement, and no later than 18 November 2026. Verification is free via GOV.UK One Login.
Can I still file my company accounts for free online?
No, not from April 2026. The free HMRC/Companies House joint filing portal closes on 31 March 2026. From 1 April 2026, you must use commercial accounting software to file your Corporation Tax return. Download your old returns from the portal before it closes.
Divyanshi is a subject matter expert in the UK accounting space, creating clear and easy-to-read content for accountants and businesses. She covers topics such as VAT returns, Self-assessment tax, bookkeeping, business planning and Year-end accounts. By understanding the common challenges faced by accountants and business owners, she focuses on writing content that answers real questions and simplifies complex topics. Her approach keeps information clear, relevant and useful for everyday business needs.
