Incorporating your business is an exciting milestone and marks an important change in the way your business is structured. As a limited company is a separate legal entity, there are a number of new responsibilities to consider, from keeping your personal and company finances separate, to meeting your Companies House and HMRC filing obligations.

To help you navigate these changes, we’ve put together this practical step-by-step guide covering some of the key things to consider after incorporating your company. Following these steps will help you keep your finances organised, meet your compliance obligations and make the most of your new company structure.

Open a business bank account

It is essential to keep personal and business finances separate to assist with managing cash flow and preparing accurate financial statements. Remember, a limited company is a separate legal entity, you are not your company. The money in the company bank account therefore belongs to the company, and should not be treated as your personal bank account.

Transfer payments to your business account
Now that your business account is set up, it’s important to inform any suppliers or service providers about your new account details. This may include updating your indemnity insurance, GDC subscriptions, or other recurring expenses.

Transfer your associate agreements

If you are an associate who has incorporated, you will need to notify the practice where you work and ensure your associate agreements are updated accordingly. If this is not done correctly, there is a risk that the income could be treated as belonging to you personally, potentially resulting in personal tax liability.

Pay yourself

One of the key differences between operating as a sole trader and through a limited company is that the company’s money belongs to the company, not to you personally. Any money you take from the company therefore needs to be treated appropriately, such as through salary, dividends or other permitted payments. We will help you create a plan for taking money from your company in a tax-efficient and sustainable way. It is important to follow this plan and speak to us before taking additional funds, as this could affect both your company’s finances and your personal tax position.

Save for tax

Now you are a company, your taxes are fundamentally different. We will build a tax plan for you that covers the personal side of things, however, it is important to ensure you have also saved for your company tax bill. As a general rule of thumb, we advise setting aside approximately 25% of company income for corporation tax liability and 33% of personal income for personal tax liability. These are planning estimates rather than the actual rates of tax you will pay.

Maintain accurate records

You must continue to maintain your financial records to a high standard – this will not just make your accounts process faster, but will also enable us to provide you with detailed support for finance applications and tax saving opportunities. You’ll manage these records through Xero, and training will be provided through our Associates Club. Alternatively, if you would prefer to sign up to our bookkeeping service, we can manage this for you.

Administrative responsibilities

As a limited company you will now have to file additional information with Companies House and HMRC, the main points here are:

• Confirmation statements – Every company must file a confirmation statement with Companies House at least once every 12 months, even if nothing has changed. We will contact you when this is due and file this on your behalf. Annual Accounts – Your company must prepare annual accounts and file them with Companies House. In general, these are due 9 months after the company’s financial year.
• Corporation tax returns – Your company is required to submit a company tax return to HMRC. This will be based on the profit that the limited company generates and is due to be paid 9 months and 1 day after the year end. It is therefore important to set aside funds throughout the year. The company tax return is due for filing 12 months after the end of the accounting period. This is separate from your personal tax return, which is due on the 31st January.
• Personal tax returns – Another point to note is that you are still required to file your self-assessment for the usual period.
• Retain financial records – You are generally required to retain your company’s accounting records for at least 6 years from the end of the relevant financial year. Some records may need to be retained for longer depending on the circumstances.
• Update company details – Let us know promptly if there are changes to your company’s registered address, directors, or shareholders, or other company details, so that we can make the appropriate notifications to Companies House.

Final Thoughts

Incorporating your business is an exciting step, but it also brings new financial and administrative responsibilities. Keeping your company and personal finances separate, maintaining accurate records and staying on top of your filing and tax obligations will help you remain compliant and give you greater visibility over your business finances.

The way you take money from your company also needs careful planning, particularly when it comes to salary, dividends and personal tax. Taking the time to put the right processes in place from the outset can make managing your company much simpler as it grows.

If you have recently incorporated and have any questions or you are wondering whether you should incorporate, please get in touch and the team will be happy to assist you.