Limited Companies Explained: What Every UK Director Needs to Know About Compliance, Tax & Filings

Introduction: Running a Limited Company with Confidence

A limited company is one of the most popular business structures in the UK, offering directors limited liability and a separate legal identity from their personal affairs. While the benefits are clear — credibility, growth potential, and tax opportunities — the responsibilities are equally significant. From filing accounts to paying Corporation Tax, every director must stay on top of their obligations to remain compliant with HMRC and Companies House.

This guide gives a complete overview of what every UK director needs to know about running a limited company.

Understanding the Role of a Limited Company

A limited company is a separate legal entity. This means its finances are distinct from those of its directors and shareholders. One of the key advantages is limited liability — if the company faces debts or legal claims, directors’ personal assets are generally protected (unless there’s wrongdoing).

This separation also creates credibility, making limited companies more attractive to investors, lenders, and clients compared to sole traders or partnerships.

Director Responsibilities & Legal Duties

Directors have legal responsibilities under the Companies Act 2006. These include:

• Acting in the company’s best interests.

• Keeping accurate financial records.

• Filing annual accounts and confirmation statements with Companies House.

• Ensuring Corporation Tax returns are filed and paid on time.

Failure to comply can result in penalties, disqualification, or personal liability in serious cases.

(Read more: Director Responsibilities & Legal Duties)

Corporation Tax and Marginal Relief

Limited companies must pay Corporation Tax on their profits. From April 2023, the system became more complex, with different rates depending on profit levels:

• Profits up to £50,000 → 19% (small profits rate).

• Profits over £250,000 → 25% (main rate).

• Profits between £50,000 and £250,000 → marginal relief applies, tapering the effective rate between 19% and 25%.

This tiered structure ensures smaller companies are not penalised in the same way as larger firms. HMRC provides a marginal relief calculator to help businesses work out their liability, but errors are common without professional advice.

(Read more: Corporation Tax & Marginal Relief Explained)

Profit Distribution & Director Pay

Company profits belong to the business, not directly to directors. To extract money legally and efficiently, directors typically use a mix of:

• Salary (processed through PAYE).

• Dividends (paid from post-tax profits).

• Director’s Loan Accounts (which have specific HMRC rules and potential extra tax charges if misused).

Getting this balance right is critical for both compliance and tax efficiency.

(Read more: Profit Distribution & Director Pay)

Companies House Filings

Every year, a limited company must:

• File a Confirmation Statement (CS01).

• Submit annual accounts.

• Maintain a register of People with Significant Control (PSC).

Companies House penalties can be significant, and failure to file can even result in the company being struck off the register.

(Read more: Companies House Filings Explained)

Payroll in Limited Companies

If a company pays directors or staff, it must operate a PAYE scheme. This means:

• Deducting Income Tax and National Insurance.

• Reporting pay to HMRC in real time (RTI).

• Handling P11Ds for benefits in kind.

Employers must also comply with workplace pension auto-enrolment rules.

(Read more: Payroll in Limited Companies)

Closing or Restructuring a Company

Directors may decide to close or restructure for commercial, financial, or tax reasons. Options include:

• Voluntary strike-off (DS01) if the company is dormant or no longer needed.

• Insolvency proceedings if debts cannot be repaid.

• Restructuring to streamline or pivot the business.

In each case, directors must continue to meet their legal obligations until the process is complete.

(Read more: Closing or Restructuring a Limited Company)

Why Expert Advice Matters

Running a limited company brings both opportunity and responsibility. HMRC rules are complex, and Companies House deadlines are strict. A proactive accountancy partner can help directors:

• Avoid penalties.

• Plan tax-efficient strategies.

• Stay compliant with changing legislation.

• Focus on growth instead of red tape.

At Wexley & Associates, we provide high-level guidance and hands-on support to ensure directors meet their obligations while optimising financial outcomes.

Stay Compliant, Stay Ahead

👉 Managing a limited company doesn’t need to be overwhelming. With the right advice, you can stay compliant, reduce risk, and focus on building your business.

Contact Wexley & Associates today for bespoke advice tailored to your company’s needs.

References

• HMRC: Running a limited company

• HMRC: Corporation Tax rates

• Companies House: Director responsibilities

• Related Wex Insider article: Corporation Tax & Marginal Relief Explained