Running a limited company in London comes with specific financial responsibilities that differ from sole traders or partnerships. From statutory filings to tax compliance and payroll management, understanding the basics of accounting is essential for staying compliant and financially healthy. This is where professional accountants for limited company businesses play a vital role.
This guide explains the core accounting basics every London-based limited company owner should know and why expert support is crucial.
What Is a Limited Company?
A limited company is a separate legal entity from its owners (directors and shareholders). This means the company is responsible for its own debts, taxes, and legal obligations. While this structure offers financial protection, it also brings stricter accounting and reporting requirements.
Key Accounting Responsibilities for Limited Companies
1. Company Registration and Records
Once registered with Companies House, a limited company must maintain accurate records, including:
- Company details and shareholders
- Director information
- Share allocations
- Financial transactions
Proper record-keeping is the foundation of good accounting and legal compliance.
2. Bookkeeping
Bookkeeping involves recording all income and expenses, including:
- Sales invoices
- Business expenses
- Bank transactions
- Supplier payments
Accurate bookkeeping ensures financial clarity and makes tax filing easier. Most accountants for limited company clients recommend using cloud accounting software for real-time updates and error reduction.
3. Corporation Tax
Limited companies must pay Corporation Tax on profits. This requires:
- Preparing annual accounts
- Calculating taxable profits
- Submitting a Corporation Tax return
- Paying tax on time
Failure to meet deadlines can result in penalties and interest charges.
4. Annual Accounts and Statutory Filings
Limited companies must submit:
- Annual accounts to Companies House
- Corporation Tax returns to HMRC
- Confirmation statements annually
Professional accountants for a limited company ensure these filings are accurate and submitted on time.
5. Director Salaries and Dividends
Directors are usually paid through a combination of:
- Salary (via PAYE)
- Dividends (from company profits)
This structure must be carefully planned to remain tax-efficient and compliant with UK laws.
6. Payroll and PAYE
If a limited company employs staff or pays directors a salary, it must:
- Run payroll
- Deduct Income Tax and National Insurance
- Submit Real Time Information (RTI) to HMRC
Payroll errors can lead to fines and compliance issues.
7. VAT Registration
A limited company must register for VAT if turnover exceeds the threshold. VAT responsibilities include:
- Charging VAT correctly
- Filing VAT returns
- Paying VAT on time
Even companies below the threshold may voluntarily register for strategic reasons.
Why Hire Accountants for Limited Company Businesses?
Managing accounting internally can be risky without expertise. Professional accountants for limited company structures offer:
- Accurate bookkeeping and reporting
- Tax planning and compliance
- Timely statutory submissions
- Payroll and VAT management
- Cash flow monitoring
- Strategic financial advice
Accountants help reduce errors, avoid penalties, and improve profitability.
Common Accounting Mistakes Limited Companies Make
- Mixing personal and business finances
- Missing filing deadlines
- Incorrect dividend payments
- Poor expense tracking
- DIY accounting without proper knowledge
These mistakes can be costly and time-consuming to fix.
Tips for Better Financial Management
- Use cloud-based accounting software
- Keep business and personal finances separate
- Review financial reports monthly
- Set aside money for taxes
- Work with experienced accountants for limited company businesses
- Maintain organised records year-round
When Should You Hire an Accountant?
Ideally, from the moment your company is formed. Early involvement ensures:
- Correct company setup
- Efficient tax structure
- Accurate financial tracking from day one
Growing businesses benefit even more from professional support as financial complexity increases.
Conclusion
Understanding accounting basics is essential for every limited company operating in London. From bookkeeping and payroll to tax compliance and statutory filings, each responsibility plays a crucial role in business success.
Working with experienced businesses like Account Ease ensures compliance, improves financial efficiency, and allows directors to focus on growth rather than paperwork. With the right accounting support, limited companies can operate confidently, legally, and profitably in London.