Limited company bookkeeping: the complete UK guide for directors

A limited company is a separate legal person. It owns its income, its bank account and its debts, and you, as a director, are an officer of it rather than the same thing. That separation is the point of a company, but it also means the books have to be kept more carefully than for a sole trader. The company must produce statutory accounts, file them at Companies House, pay Corporation Tax and keep records for years.

This guide explains how company bookkeeping works from the director's chair: what to record, how to treat money you take out, what the deadlines are and how to run a monthly routine that keeps everything under control.

What the company must keep records of

Company law and tax law require records that show and explain every transaction. In practice that means:

• All money received and spent, with the reason for each
• Sales and purchase invoices and receipts
• Bank statements for every company account
• Payroll records, if you pay yourself or others through PAYE
• VAT records, if registered
• Assets and liabilities, including loans and hire purchase
• Stock at year-end, if relevant
• Director transactions, which sit in the director's loan account

Companies must keep these for at least 6 years from the end of the accounting period they relate to. See our guide to business records for HMRC.

The chart of accounts

Software organises everything into categories called a chart of accounts. For a company it includes income accounts, cost of sales, overheads, and balance sheet accounts such as bank, debtors, creditors, VAT, PAYE liability, loans, share capital and the director's loan account. A tidy chart of accounts makes reports meaningful. If your file has grown messy, a bookkeeping clean-up can rebuild it.

Paying yourself: salary, dividends and the director's loan account

This is where limited company bookkeeping differs most from sole trading, and where errors are most costly.

Salary. A director can be paid through payroll. The salary is a company expense, and payroll tax and National Insurance rules apply. Many directors take a modest salary at or around the National Insurance thresholds.

Dividends. Profits after Corporation Tax can be distributed as dividends to shareholders. Dividends must come from available profits, should be supported by a board minute and a dividend voucher, and are taxed on the shareholder rather than the company. For 2026/27 the dividend allowance is £500 and the rates are 10.75%, 35.75% and 39.35%. Use our director salary and dividend calculator to compare take-home.

The director's loan account. If you take money out that is not salary, a dividend or a properly documented expense, it becomes a loan from the company to you, recorded in the director's loan account. If the account is overdrawn at the year-end and the amount is not repaid within 9 months and 1 day, the company pays a section 455 charge of 33.75% of the outstanding balance. Loans over £10,000 can also create a taxable benefit. Money you put into the company is a credit, which the company owes you and can repay tax-free. Our director's loan account bookkeeping service tracks the balance so there are no year-end surprises, and we explain the rules in our blog on the director's loan account.

Payroll

If you pay yourself or anyone else through payroll, the company must run PAYE: report pay to HMRC on or before each payday, pay the tax and National Insurance over, and provide payslips. A one-director company paying no salary does not need payroll, but most pay at least a small salary. The bookkeeping side is posting payroll journals, reconciling the PAYE liability and checking payments. See payroll bookkeeping.

VAT

Companies follow the same VAT rules as other businesses: register above £90,000 of taxable turnover, use Making Tax Digital compatible software and file returns, usually quarterly. See our VAT guide.

The year-end

At the end of each accounting period the books are finalised so accounts can be prepared. Typical year-end bookkeeping includes:

• Reconciling every bank, card and loan account to the year-end date
• Posting accruals, for costs incurred but not yet invoiced, and prepayments, for costs paid in advance
• Updating the fixed asset register and depreciation
• Counting and valuing stock
• Checking the director's loan account
• Reviewing debtors and creditors, including bad debts

Our year-end bookkeeping service does this and hands your accountant a clean pack.

Deadlines that matter

Deadline	When
Confirmation statement	At least once every 12 months
Annual accounts at Companies House	9 months after the year-end
Corporation Tax payment	9 months and 1 day after the year-end
Corporation Tax return (CT600)	12 months after the year-end
VAT returns	One month and seven days after each VAT period
PAYE payments	By the 22nd of the following month for electronic payments

Late filing at Companies House triggers automatic penalties that escalate with delay, and late Corporation Tax filing has its own penalties. Our Corporation Tax calculator shows what your profit is likely to cost, including marginal relief.

Corporation Tax in brief

For 2026/27 the small profits rate is 19% on profits up to £50,000 and the main rate is 25% on profits over £250,000, with marginal relief in between. The limits are divided by the number of associated companies plus one. Profit for tax is accounting profit adjusted for items such as depreciation, entertainment and capital allowances.

A monthly routine for directors

1. Reconcile the bank and any credit cards.
2. Match supplier bills and customer payments.
3. Review the director's loan account.
4. Check payroll journals and PAYE payments.
5. Review VAT coding.
6. Run profit and loss and cash reports.
7. Note the next deadline.

Our free monthly checklist covers the details.

Common mistakes directors make

• Paying personal costs from the company account without recording them
• Taking dividends without sufficient profits or paperwork
• Leaving the director's loan account overdrawn at year-end
• Missing the Companies House deadline
• Not keeping receipts
• Forgetting to record the director's own expenses claims properly
• Leaving the books until the year-end

When to get help

If your company is VAT registered, has payroll, or you are not confident about the director's loan account, a bookkeeper pays for itself. Our service for limited companies covers all of it at £15 an hour.

A worked example of a director's year

Consider a consultant who runs a one-director company with a 31 March year-end. Through the year she invoices clients, pays herself a small monthly salary through payroll, and takes dividends each quarter after checking profits. Her bookkeeper reconciles the bank monthly, posts the payroll journals, codes her expense claims and tracks the director's loan account, which stays in credit. In April the bookkeeper finalises accruals and prepayments and hands the accountant a clean pack. The accountant files the accounts well before the December deadline and the Corporation Tax return before the following March. Nothing in that year was difficult. It was simply organised, which is what good limited company bookkeeping looks like.

Frequently asked questions

Do I need an accountant for a limited company?

You are legally responsible for filing accounts and a Corporation Tax return, and most directors use an accountant. A bookkeeper keeps the records through the year so the accountant's work is faster and cheaper.

How long must a company keep records?

At least 6 years from the end of the accounting period.

Can I pay myself dividends every month?

Yes, if the company has sufficient distributable profits and you document each dividend. Some directors pay quarterly.

What is a section 455 charge?

A tax charge of 33.75% on an overdrawn director's loan account that is not repaid within 9 months and 1 day of the year-end. It is repayable when the loan is cleared.

Can you do my limited company bookkeeping?

Yes. Get an instant quote or see bookkeeping for limited companies.