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October 6, 2022
October 6, 2022
Tax essentials

How do I register a limited company?

Desiree Weimann
Desiree Weimann
Here's everything you need to know about how to register a limited company and when you should do it.
Earnr is the finance and tax companion for the self-employed and side hustlers. We give you more time to run your business. Download Earnr for free on iOS. Need tax advice now? Ask Earnr AI, our new AI tax assistant

A limited company is an organisation that is set up to run your business. The main difference with being a sole trader is held in legal and tax liabilities. In fact, you will no longer be wholly responsible for it, as business finances will be separated from personal finances, meaning that the company’s debts are not directly your personal ones. Moreover, profits made will be subject to corporation tax set at 19%, and most limited companies are limited by shares.

Here's everything you need to know about registering a limited company.

When shall I register a limited company?

There’re two main reasons why a limited company might be more convenient for you than being a sole trader.

The first one is that a limited company has limited liability and it’s a separate legal entity. This means that in case of financial difficulties, your personal assets won’t be impacted but only what you’ve invested in the company.

The second reason is tax efficiency. This is mainly convenient for high earners (earning above £50,270. The reason is that as sole traders, they would be taxed 40% on their income, whereas limited companies are charged 19% in Corporate Tax.

How to register a limited company

You need to register your company (online or via post) with Companies House to obtain a Certificate of Incorporation.

To do this, you have to provide different information. Specifically:

Note that given that your company’s finances are separated from your own, you also need to set up a separate business bank account.

Moreover, the director of a limited company also needs to:

Do I need to pay for registering my company?

The answer is YES but the amount depends on whether you register via post or online. In fact, if you register online the cost will be £12, whereas if you register via post you’ll pay £40.

Do I need to register for VAT?

If your takings exceed £85,000 per annum, you must register for VAT. Therefore, you must maintain annual statutory accounts, send companies house and annual returns and provide HMRC with annual tax returns.

Read more about VAT and how to register for it here.

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