Your First Tax Year as a Limited Company Director

Your first year as a limited company director is bound to be busy, and you’re going to be learning on the job. Alongside your work, there’s now the added responsibility of managing your company’s finances. During this busy and sometimes overwhelming time, Caroola will be on hand to offer support and advice where you need it.

We’ve put together a quick and easy reference to help get you started and help steer you for your first tax year.

Your responsibilities as a limited company director

As a limited company director, your financial responsibilities each year are as follows:

• The completion of annual accounts
• Confirmation statements
• Corporation Tax Return (CT600)
• Submitting VAT returns
• Employer (PAYE) returns
• Event-based filings to Companies House

Your company year-end

Your year-end, also known as your accounting reference date, is the completion of your accounting period. This will not necessarily align with the start of the new tax year. Your year-end accounts will be prepared to your accounting reference date and will need to be submitted within nine months of your company’s yearend.

Your limited company’s first end-of-year accounts

At the end of your company’s first year, you will need to submit the following information:

Annual accounts

Your annual accounts, or ‘financial accounts’ are used to provide a report of your company's financial activity throughout the tax year.

As a contractor, it is likely that you will be regarded as a micro entity and therefore will be permitted to file filleted accounts. A company will be a micro-entity if it has any 2 of the following:

• a turnover of £632,000 or less
• £316,000 or less on its balance sheet
• 10 employees or less

As a micro entity, your annual accounts must include:

• A balance sheet, which shows the value of everything your company owns, owes, and everything which is owed on the last day of the financial year
• A profit and loss account, which shows your company’s sales, its running costs, and any profits or losses it has made over the financial year
• Any notes about the accounts
• A director’s report

However, micro-entities do not have to deliver a copy of the directors’ report or the profit and loss account to Companies House.

Your first annual accounts will normally cover more than 12 months because they will start on the day that your company was incorporated.

Company Tax Return

Your Company Tax return (CT600) will include details of your company’s income, and expenses that are allowable for Corporation Tax relief. The remaining taxable profit will be used to calculate the amount of Corporation Tax you are required to pay. Remember, there are certain expenses that whilst allowed in your company accounts will not qualify for corporation tax relief, this includes client entertainment expenses.

How to complete your first Self-Assessment Tax Return

As a limited company director, you will need to submit a Self-Assessment Tax Return. Your Caroola accountant can take care of this for you.

If you’ve never completed a Self-Assessment Tax Return previously, you will need to register with HMRC. You will need to register before 5th October. This can be done online, by phone or by post and you will need to supply the following information:

• Your National Insurance number
• Your business and your personal details

Once you have registered, you will be issued with a Unique Taxpayer Reference (UTR). Remember to keep this safe, you’ll need it later.

What information do I need to complete on my Self-Assessment Tax Return?

A Self-Assessment tax return will require you to enter details of your worldwide income and any tax suffered already. You will need to complete sections of your tax return that relates to the following:

• Any income received from employment (this will usually be through your limited company)
• Any supplementary income you have received
• Income from dividends
• Income from investments (ie pensions) or from property if you’re a landlord
• Any income from benefits
• Child Benefit income
• Gifts to charity if you’re claiming tax relief

If you’re submitting your tax return online, HMRC will automatically calculate how much tax you are required to pay.

What are payments on account?

If you are required to pay more than £1,000 on your first tax return, you will need to pay towards your next year’s tax liability in advance on the assumption that you will earn the same amount in the next tax year. This means that you will need to pay tax in advance on top of income already earned.

When do my Self-Assessment Tax Return forms have to be in?

The deadline for completing your Self-Assessment Tax Return is the 31st October for paper returns and 31st January for online returns. Your tax liability must also be paid by 31^st January.

How do I take money out of my limited company?

There are a number of different ways to withdraw money from your limited company, but most directors choose to pay themselves a combination of salary and dividends.

Your Caroola accountant can help you define the most efficient way of paying yourself.

Help with your responsibilities as a limited company director

As a new director, having the right support by your side to help you weather the storm is paramount. When you enlist the help of Caroola, they will be on hand to support you with your new financial responsibilities and offer guidance whenever you need it.