New Limited Company? What to Set Up in the First Few Months

Incorporating at Companies House creates the company as a legal entity — that's all it does. It does not register you for Corporation Tax, VAT, PAYE or anything else with HMRC, and it does not open a bank account or set up any bookkeeping.

Companies House is where you file annual accounts and the confirmation statement, and where changes to directors, shareholders and registered office are reported. HMRC is where every tax registration lives. New directors often assume one covers the other — it doesn't, and HMRC deadlines run from when you start trading, not from when you get around to registering.

You must register for Corporation Tax with HMRC within 3 months of starting to trade — trading includes buying, selling, advertising, employing someone or renting a property, not just invoicing your first customer. HMRC will issue the company's Unique Taxpayer Reference (UTR) shortly after incorporation; keep it safe, as you'll need it for every Corporation Tax interaction.

Registration is usually done through your HMRC business tax account (or Government Gateway). If you used a formation agent, check whether they registered you — many don't. Our guide to the HMRC business tax account explains how to add Corporation Tax to your online services if it isn't already there.

A limited company is a separate legal person — its money is not your money. Open a dedicated business bank account before you start spending, and run every business transaction through it. Mixing company and personal spending creates a director's loan account mess that takes real time (and accountancy fees) to untangle later.

If you've already paid for company costs personally, that's fine — record them properly and reimburse yourself from the company account. The habit that matters: company income in, company costs out, everything through the one account.

Set up proper bookkeeping software in week one, not at year-end. Every invoice, receipt and bank transaction recorded as you go means accurate accounts, no year-end shoebox, and a live view of what the company actually owes in tax.

The two platforms we work with most are FreeAgent and Xero. FreeAgent suits many smaller owner-managed companies; Xero tends to fit businesses expecting to grow, add apps or need more reporting. Either is fine — the wrong choice is a spreadsheet and good intentions.

Most director-shareholders take money out as a mix of a small salary (through PAYE) and dividends from post-tax profits. Dividends are not a business expense and can only be paid from available profits — they are not a substitute for salary whenever cash is tight.

Important caveat: the optimal salary/dividend mix depends on your other income, whether you have employees, pension plans and the current tax year's rates and allowances. There is no single "correct" figure that applies to everyone, and the numbers change between tax years. Get this set up properly for your circumstances rather than copying a figure from a forum. See taking dividends from a limited company for the mechanics.

You must register for VAT once your VAT-taxable turnover passes £90,000 in any rolling 12-month period — it's turnover, not profit, and it's a rolling test, not aligned to your accounting year. You can also register voluntarily below the threshold, which can make sense if your customers are mainly VAT-registered businesses.

Most new companies don't need to register immediately, but monitor turnover monthly so you're not caught out — late registration means paying VAT out of your own pocket on past sales. Read the £90,000 VAT registration threshold explained and how to register for VAT.

If the company pays you a salary above the relevant thresholds, or you employ anyone at all, the company must register as an employer with HMRC and run payroll under PAYE before the first payday. Payroll must be reported to HMRC in real time (RTI) on or before each pay date.

Even a director-only company paying a small salary usually needs a PAYE scheme. Payroll errors and late filings attract penalties quickly, so this is one to set up properly from the start rather than patch up later.

If your company operates in construction — as a contractor paying subcontractors, or as a subcontractor being paid — the Construction Industry Scheme applies. Contractors must register, verify subcontractors, deduct tax where required and file monthly CIS returns. Subcontractors should register to have the lower deduction rate applied.

CIS penalties are strict and monthly, so construction businesses should register before the first payment is made. See our guide to CIS registration.

Your company's exact dates depend on its incorporation date and accounting reference date, so treat these as the general rules rather than your personal deadlines:

• First accounts (Companies House): normally due 21 months after incorporation; after that, 9 months after each financial year-end.
• Corporation Tax return: due 12 months after the end of the accounting period — but payment is due 9 months and 1 day after the period end, so the return is almost always done by the payment date.
• Confirmation statement: at least once every 12 months, confirming Companies House holds correct details of directors, shareholders and PSCs.

More detail: statutory accounts and confirmation statements.

Keep every invoice, receipt and bank statement — digitally is fine, and software makes this easy. HMRC can ask for records going back several years, and "the dog ate my receipts" is not a defence.

The single best cash-flow habit for a new company: every time money comes in, move a sensible percentage into a separate savings pot for Corporation Tax (and VAT/PAYE once registered). The tax bill on your first year's profit arrives months after you've earned it — companies that treat all incoming cash as spendable are the ones that struggle when it does.