Is 2025 your year to incorporate? Here are our top tips

Nearly 900,000 companies were incorporated in 2024 – an 11.2 per cent increase compared to 2023.

The advantages of limited companies can include limited personal liability, lower tax liabilities and greater exposure to investment opportunities.

Making the decision to incorporate should not be taken lightly.  Whilst there are benefits to operating through a limited company, there are also greater compliance requirements. For example, accounts must be prepared in a set format and must be filed at Companies House. An annual confirmation statement must also be filed at Companies House and a company must prepare and submit its own tax return. These requirements need to be prepared for.

To help you start your journey towards limited company status, here are our top tips:

Paying yourself

As a director, you can pay yourself via salary, dividends, or a mixture of both to maximise your income and minimise tax liabilities.

The most efficient approach is often to pay yourself a lower salary, so you are not liable for National Insurance Contributions (NICs).

Your salary can be set at a level where a credit is obtained to your national insurance record for state pension purposes, even though no NIC’s are payable. Additional income is then be paid by way of dividends.

However, please be aware that dividends can only be paid if the company has sufficient post tax profits from which to pay them.

Structuring your company

If your company is likely to have more than one shareholder, several key aspects must be considered. You will need to decide on the share structure, and consider how dividends will be paid and what voting rights will apply.

At this stage, it is worthwhile taking legal advice, with a view to minimising problems should any shareholders wish to exit the company.

Open a business bank account

Open a separate bank account for your company as soon as it is formed. This is required because a company is a separate legal entity.

Treat your business like a separate entity

Only income and costs relating to the business should go through the company bank account and accurate accounting records will need to be maintained.

If you plan to inject personal funds into your company that should be done through a director’s loan account. This will enable the funds to be withdrawn as the company generates its own cash.

If you are considering incorporation, you should seek professional advice and ongoing support to reduce the potential for errors and to ensure compliance with regulations.

Ready to take the next step? Contact us today for expert advice on incorporating your business.