Limited Company Annual Running Costs in the UK

Setting up a limited company is quick. Running one well is where the real cost sits. Alongside tax you pay to the Government, there are professional fees, filing obligations and day to day overheads that sole traders do not face. This guide explains the annual running costs most UK limited companies should expect, so you can budget with your eyes open.

Key takeaways

• Running costs are separate from the tax you pay. Budget for both.
• The main recurring items are accountancy, filings, insurance, software and banking.
• A company has to file accounts, a confirmation statement and a Company Tax Return, each with its own deadline.
• Most compliance costs are tax deductible when incurred for the business.
• Always check current official fees on GOV.UK rather than relying on old figures.

What counts as a limited company running cost?

A running cost is any recurring spend needed to keep the company compliant and operating, as opposed to a cost of making sales. It includes professional fees, statutory filings, insurance and software. It does not include corporation tax, which is a tax on profit rather than a cost of keeping the company going. Thinking of the two separately stops you underestimating what the company needs each year.

The main annual cost categories

Statutory filings every year

A private limited company normally has three recurring filings. First, annual accounts go to Companies House, usually within nine months of the end of the accounting period. Second, a confirmation statement confirms that the company details held on the public register are correct. Third, the Company Tax Return and the corporation tax payment go to HMRC. Corporation tax is normally due nine months and one day after the period ends, while the return is due 12 months after. Our guide to company accounts deadlines explains how these dates fit together. Check the current fees and penalties on GOV.UK's Companies House page.

Costs people forget

A few items catch new directors out. Software for bookkeeping and invoicing is nearly always needed, and if you are VAT registered you will need software that supports digital VAT filing. A registered office address or mail forwarding service may be needed if you do not want your home address on the public register. Professional memberships, equipment, a website and an accountant's extra charge for one off tasks such as director loan reviews also add up. Ask your accountant what is outside the standard package before you sign.

Worked example (illustrative)

"Nadia", an illustrative example, runs a one person consultancy through a limited company. She makes a simple list at the start of the year: accountancy fee, Companies House filing, software subscription, insurance and bank charges. She adds each as a monthly amount, then adds a small contingency for items she has not thought of. By dividing the annual total by twelve she sees what the company must set aside each month before any tax or her own pay. The numbers differ for every business, but the method is the same: list, convert to monthly, add a buffer.

How to keep running costs down

You can control more than you think. Ask for a fixed fee accountancy package so you are not surprised by extra charges. Keep tidy records so your accountant spends less time sorting things out. Compare insurance and software yearly rather than letting subscriptions renew automatically. And file on time, because penalties are an avoidable cost. Our limited company accountant packages guide explains what a good package should include. See also whether a limited company is right for you if you are still deciding.

A year in the life of your company calendar

Putting the costs on a calendar makes them easier to manage. Early in the year, review insurance renewals and software subscriptions. During the year, keep your books up to date monthly so there is nothing to untangle later. If you are VAT registered, remember your quarterly returns. If you run payroll, remember the monthly payments to HMRC. Around the end of your accounting period, speak to your accountant about planning, such as pension contributions or equipment purchases, before the period closes. After the year end, accounts, the Company Tax Return and the corporation tax payment follow in the months after. Seeing these dates in one place stops cash surprises.

It also helps to hold a separate savings pot for tax and compliance costs. Each time the company is paid, move an amount into that pot so the money is there when bills fall due. How much to set aside depends on your profits and your own pay decisions, so ask your accountant to suggest a sensible percentage for your business. A pot that is slightly too big is far easier to live with than one that is too small.

Questions to ask before you hire an accountant

Fees are only part of the picture. Ask whether the quote includes year end accounts, the Company Tax Return, the confirmation statement, VAT returns and payroll, or whether each is extra. Ask how often you will speak, who your contact is and how quickly they reply. Ask what happens if HMRC opens an enquiry, and whether support for that is included or charged separately. A clear answer to each of these questions lets you compare providers properly rather than on price alone.

Common mistakes

• Budgeting for tax but not for compliance costs. The fees are smaller than tax but they recur every year.
• Choosing on the cheapest headline fee. Check what is excluded.
• Missing filing dates. Late penalties are avoidable.
• Mixing personal and company spending. This creates extra work and potential tax issues.
• Ignoring renewals. Insurance and software roll on automatically and are rarely reviewed.

Want to see what a complete package looks like for your company? Take a look at our limited company packages or the pricing page, and get in touch for a quote that matches your situation.