Limited company director bookkeeping duties: what the law requires you to keep and file

Becoming a company director feels like a promotion: you own the business, you decide what to do and the company protects your personal finances. But it also brings legal duties that employees and sole traders never face, and bookkeeping is at the centre of them. A director who ignores the books is not just being untidy. They are risking fines, disqualification and in the worst cases personal liability for the company's debts. This guide explains what the law actually requires of directors in relation to accounting and record keeping, and how to meet those duties without drowning in paperwork.

The main legal duties

Under the Companies Act 2006 and related tax law, directors are responsible for ensuring that the company:

1. Keeps adequate accounting records.
2. Prepares annual accounts that give a true and fair view.
3. Files accounts and a confirmation statement at Companies House on time.
4. Files a Company Tax Return and pays corporation tax on time.
5. Maintains statutory registers, including directors, shareholders and people with significant control.
6. Complies with VAT, PAYE and other tax obligations where relevant.
7. Acts in the company's interests, including avoiding trading while insolvent without care for creditors.

These duties fall on all directors, not just the one who does the paperwork. If you delegate, you must supervise.

Accounting records: what counts as adequate

The company must keep records that are sufficient to:

• Show and explain every transaction.
• Disclose with reasonable accuracy, at any time, the financial position of the company.
• Enable the directors to ensure that the accounts comply with the law.

In practice, that means:

• A record of all money received and paid, with the date and what it was for.
• A record of the company's assets and liabilities.
• For businesses dealing in goods, a record of stock at the year end and of goods bought and sold, except for ordinary retail sales.

This is simply good double-entry bookkeeping, held in accounting software or equivalent. See double-entry bookkeeping explained and our limited company bookkeeping guide.

How long to keep records

Private limited companies must keep accounting records for six years from the end of the financial year to which they relate. HMRC can ask for records for longer in cases of suspected deliberate error. Keep supporting documents, such as invoices, receipts, contracts and bank statements, for the same period. See how long to keep business records.

Statutory books and registers

Companies must keep and update:

• Register of members (shareholders), with the number and class of shares.
• Register of directors and, where relevant, secretaries.
• Register of people with significant control (PSC).
• Minutes of directors' and shareholders' meetings and written resolutions.
• Copies of director service contracts where applicable.
• Register of charges if the company has secured borrowing.

Most are now held electronically or by the Companies House filings themselves, but the company is still responsible for accuracy. Changes must be notified to Companies House within the required time, usually 14 days for director changes.

Annual filing

Accounts

Private companies must file annual accounts within nine months of their accounting reference date. The first accounts are due 21 months after incorporation, in most cases. Late filing means automatic penalties, which are higher for repeated lateness. See Companies House confirmation statement and accounts.

Confirmation statement

At least once every 12 months, confirming the company's details are correct, with a filing fee. A late statement can lead to the company being struck off.

Tax

The company must register for corporation tax, file a CT600 return and pay tax on time. See corporation tax deadlines and the CT600.

Keeping company money separate

A limited company is a separate legal entity. Its money is not yours. Directors must not treat the company's bank account as a personal account. Anything you take out must be:

• Salary, through payroll.
• Dividends, paid from profits after tax, properly declared. See dividends: vouchers and minutes.
• Expense reimbursement for genuine business costs.
• Repayment of a director's loan you made to the company.

Taking money without a proper basis creates a director's loan that can attract a tax charge. See director's loan account explained.

VAT and payroll duties

If the company is registered for VAT, directors are responsible for accurate returns and payments. If it has employees, including directors paid a salary, PAYE and National Insurance must be operated, with Real Time Information submitted each pay run. See payroll bookkeeping for small employers and limited company director salary and dividends.

Personal liability

The company's limited liability protects you in most situations, but not all. Directors can be personally liable where:

• They give personal guarantees for company debts.
• They are found to have acted wrongfully or fraudulently.
• They trade while the company is insolvent and fail to minimise losses to creditors (wrongful trading).
• They fail to keep adequate accounting records before an insolvency, which is an offence and can lead to disqualification.
• The company fails to pay certain tax debts, in some cases where HMRC issues personal liability notices.
• They take unlawful dividends and the company later fails, so the dividends can be recovered.

Records are your first line of defence. If you cannot show the company's financial position, you cannot demonstrate that you acted responsibly.

Penalties for failing to keep records

Failing to keep adequate accounting records is a criminal offence in the Companies Act, punishable by a fine or imprisonment in serious cases, though prosecution is rare. More likely consequences are:

• Automatic late filing penalties from Companies House.
• HMRC penalties for inaccurate returns or late filing.
• Disqualification as a director in cases of serious failure.
• Difficulty obtaining finance or selling the company.

A practical director's checklist

1. Open a company bank account and use it for everything.
2. Choose cloud accounting software and connect the bank.
3. Capture and store invoices and receipts digitally.
4. Reconcile the bank monthly.
5. Record director's loans and dividends accurately.
6. Keep the statutory registers current.
7. Diarise the nine-month accounts deadline, the confirmation statement date and the tax dates.
8. File on time, or ask for help well before the deadline.
9. Review profit and cash monthly.
10. Take advice before acting if the company is in difficulty.

Worked example

Maya is the sole director of a design company. In its second year she pays a few personal bills from the company account and takes £3,000 in cash for living expenses, with no dividend declaration. At year end the director's loan account shows she owes the company £7,400. She did not repay it, and the company's corporation tax return is due nine months after year end. The result is a potential extra tax charge on the loan, unless she repays it within nine months and one day. A bookkeeper identifies the problem in month three of the year, helps her declare a lawful dividend, and avoids the charge. Records, not luck, saved her money.

Common mistakes

1. Leaving everything to the accountant at year end.
2. Mixing personal and company money.
3. Declaring dividends with no profits.
4. Missing the Companies House deadlines.
5. Not updating the PSC register.
6. Failing to keep receipts.
7. Believing limited liability removes all responsibility.

Support

Our limited company bookkeeping service keeps your records compliant and your filings on track, from a flat £15 an hour. See the instant quote. We are bookkeepers, not solicitors, so for legal questions take advice.

Frequently asked questions

Can I leave bookkeeping entirely to my accountant?

You can delegate the work but the legal responsibility stays with the directors. Keep up with what is being done.

How long must a company keep its accounting records?

At least six years from the end of the financial year they relate to.

Are non-executive directors responsible too?

Yes. All directors share the duties, though the level of involvement may differ.

What happens if I do not file on time?

Companies House applies automatic penalties, and HMRC can penalise late tax returns. Persistent failure can lead to the company being struck off.

Can you take over the bookkeeping?

Yes. Ask for a free health check.