Your First Year Running a Limited Company: Month-by-Month Survival Guide

You did it. You filled in the forms, paid the fee, and received that magical email from Companies House confirming your limited company exists. It feels momentous because it is. You're now a company director with all the opportunities, and responsibilities, that entails.

But here's what nobody tells you: the first 12 months of running a limited company are the most compliance-heavy of any year. There are registrations to complete, systems to establish, and deadlines that start ticking the moment you incorporate. Miss one, and you could face penalties before you've even invoiced your first client.

Take a breath. This guide walks you through everything, month by month. By the end of year one, you'll have systems in place that make year two feel like a breeze.

Congratulations - You've Incorporated. Now What?

The certificate of incorporation sitting in your inbox confirms three things:

1. Your company legally exists - It has a unique company number and is listed on the Companies House register
2. You are now a director - With legal duties and personal responsibilities
3. Multiple clocks are ticking - Every deadline is calculated from your incorporation date

Before you do anything else, write down these key dates:

Date	What It Determines
Incorporation date	Starting point for all your deadlines
Accounting Reference Date (ARD)	Your financial year-end (usually last day of incorporation month)
First accounts deadline	21 months from incorporation
First Confirmation Statement	12 months from incorporation + 14 days to file
Corporation Tax registration	Within 3 months of starting to trade

These dates will govern your compliance calendar for the life of your company. Get them wrong, and you're starting with penalties.

Month 1: Essential Setup

Your first month is about building foundations. Rush this, and you'll spend the rest of the year fixing problems.

Open a Business Bank Account

This is non-negotiable. UK law requires you to keep company finances separate from personal finances. Your company is a separate legal entity; treat it that way.

What you need to open an account:

• Certificate of incorporation
• Proof of identity (passport, driving licence)
• Proof of address
• Details of directors and shareholders
• Your company's SIC code (business activity)

Popular options for new companies:

Bank	Monthly Fee	Opening Time	Best For
Starling Business	Free	1-3 days	Quick setup, excellent app
Tide	Free	Same day possible	Invoicing integration
Revolut Business	Free tier	1-2 days	Multi-currency
Barclays	From £8/month	2-4 weeks	Traditional banking relationship
Lloyds	From £8/month	2-4 weeks	Branch access needed

Start this process immediately. Even the fastest digital banks can take a few days, and traditional banks often take weeks.

Set Up Your Registered Office

Your registered office is the official address where legal documents are sent. It appears on the public Companies House register, so think carefully:

• Your home address: Free, but visible to anyone searching your company
• Accountant's address: Common, but check they offer this service
• Virtual office service: From £50-150/year, provides privacy and mail handling

Whatever you choose, ensure someone checks the post regularly. Missing a letter from HMRC or Companies House can trigger penalties.

Start Keeping Records from Day One

Every transaction from day one must be recorded. This includes:

• Money going in (investments, loans, first sales)
• Money going out (setup costs, equipment, software)
• Receipts for every purchase
• Invoices for every sale

Don't think "I'll sort this out later". Later never comes, or it comes at 11pm the night before your accounts are due. Set up a system now:

Option 1: Accounting software

• AccountsOS, Xero, FreeAgent, or similar
• Connects to your bank for automatic imports
• Categorises transactions as you go
• Generates reports when needed

Option 2: Spreadsheet

• Legally acceptable but high risk of errors
• No automatic bank reconciliation
• You'll likely need to migrate later anyway

Option 3: Shoebox

• Technically allowed but genuinely terrible
• You will regret this choice

Registering for Corporation Tax (Within 3 Months)

Here's a deadline many new directors miss: you must register for Corporation Tax within 3 months of starting to trade.

"Starting to trade" means the earlier of:

• First sale or invoice
• Buying stock or materials
• Advertising your services
• Employing someone

Even if you're not profitable yet, if you've started trading, you need to register.

How to register:

1. Go to the HMRC Corporation Tax registration service
2. You'll need your company's UTR (Unique Taxpayer Reference) - if you don't have one, HMRC will issue it
3. Provide details of your accounting period and business activities
4. HMRC will confirm registration and your payment deadlines

What happens if you miss the deadline?

HMRC can issue penalties of up to £3,000 for late registration, though they're often lenient with genuine new companies. The bigger risk is missing your first Corporation Tax payment deadline because you weren't properly registered.

Do You Need to Register for VAT?

VAT registration is mandatory once your taxable turnover exceeds £90,000 in any rolling 12-month period. Below that threshold, it's optional.

When You Must Register

You must register if:

• Your turnover has exceeded £90,000 in the last 12 months, OR
• You expect it to exceed £90,000 in the next 30 days

You have 30 days from triggering either threshold to register.

When Voluntary Registration Makes Sense

Even below £90,000, registration can be beneficial if:

Situation	Why It Helps
High startup costs	Reclaim VAT on equipment, software, professional fees
B2B customers	They can reclaim what you charge, so price is neutral
Flat Rate Scheme eligible	Keep the difference between what you charge and pay
Credibility matters	Some larger clients prefer VAT-registered suppliers

When to Stay Unregistered

Don't register if:

• Your customers are mainly consumers (they can't reclaim VAT)
• You'd have to increase prices by 20% to stay competitive
• Your expenses are mostly zero-rated (e.g., wages, insurance)
• The admin burden isn't worth it

See our VAT threshold guide for detailed analysis.

Setting Up PAYE for Your Salary

If you're paying yourself a salary, even a small one, you must register as an employer and operate PAYE (Pay As You Earn).

Register before your first payday:

1. Register as an employer with HMRC online
2. You'll receive an employer PAYE reference
3. Set up payroll software (many accounting packages include this)
4. Calculate tax and National Insurance on each payment
5. File a Full Payment Submission (FPS) on or before each payday
6. Pay HMRC by the 22nd of the following month

The tax-efficient salary for 2025/26:

Most directors pay themselves a salary of £12,570 (the personal allowance threshold). This means:

• No income tax on the salary
• Qualifies for state pension and other benefits
• Company gets Corporation Tax relief on the salary cost

Beyond this, dividends are usually more tax-efficient than additional salary.

Choosing Your Accounting Year End

Your first accounting period runs from incorporation until your Accounting Reference Date (ARD). By default, this is the last day of the month in which you incorporated.

Example: Incorporated 15 March 2026 → ARD is 31 March → First accounts cover 15 March 2026 to 31 March 2027

Why Change Your Year End?

You can change your ARD by filing form AA01 with Companies House. Common reasons:

New Year End	Why Choose It
31 March	Aligns with the tax year (6 April), simpler tax planning
31 December	Calendar year, intuitive for planning
30 September	Popular for deferring Corporation Tax payments
End of quiet period	Easier to prepare accounts when business is slower

Rules for changing:

• Can shorten your accounting period at any time
• Can extend once every five years
• Maximum accounting period is 18 months

For most new companies, the default ARD is fine. Consider changing if you have a specific reason.

First 3 Months: Build Good Habits

The habits you build in months 1-3 will serve you for years. Or haunt you. Your choice.

The Receipt Habit

Every business expense needs documentation. No exceptions.

Create a system:

1. Physical receipts: Photograph immediately, store photos in a dedicated folder
2. Email receipts: Forward to a receipts folder or dedicated email address
3. Subscriptions: Screenshot or save the invoice email
4. Bank payments: Note what each payment was for while you remember

AccountsOS lets you forward receipts directly via email or snap them with your phone. The AI extracts the details automatically.

The Weekly Review

Block 30 minutes every Friday for a financial check-in:

• Any uncategorised bank transactions?
• Any receipts not yet uploaded?
• Any invoices unpaid?
• Any bills coming due?

This small habit prevents the year-end panic of "where did this £500 payment go?"

Invoice Promptly

Invoice as soon as work is complete. Waiting costs you money:

• Cash flow suffers
• You forget details
• Clients take longer to pay older invoices
• You might forget entirely

Set up invoice templates now. Include:

• Your company name, address, and company number
• VAT number (if registered)
• Client details
• Clear description of work
• Payment terms (14 or 30 days is standard)
• Bank details for payment

Month 6: Review - Are You On Track?

Halfway through your first year is the perfect time to take stock.

The 6-Month Checklist

Registrations complete?

• Corporation Tax registered
• VAT registered (if needed)
• PAYE set up (if paying salary)
• Business bank account active

Records up to date?

• All bank transactions categorised
• All receipts stored
• All invoices recorded
• Mileage log maintained (if applicable)

Financial health check:

• What's your revenue so far?
• What's your profit margin?
• Are you on track for your projections?
• Any large expenses coming up?

Early Warning Signs

Act now if you spot these issues:

Problem	Solution
Cash flow tight	Review payment terms, chase overdue invoices, delay non-essential purchases
Revenue below forecast	Reassess pricing, marketing, or service offering
Expenses higher than expected	Audit subscriptions and recurring costs
Bookkeeping behind	Catch up now, consider outsourcing or better software
Director's loan account growing	Plan how you'll repay or declare as dividend

Six months in, problems are fixable. Twelve months in, they're expensive.

Understanding Your Key Deadlines

Limited company deadlines are absolute. Companies House and HMRC don't care about your excuses. Here's every deadline that matters:

Companies House Deadlines

Filing	Deadline	Penalty If Late
Confirmation Statement	Within 14 days of your confirmation date	£150+
Annual Accounts (first year)	21 months from incorporation	£150-£1,500
Annual Accounts (subsequent)	9 months after year end	£150-£1,500
Change of director/address	14 days from change	£150+

HMRC Deadlines

Filing/Payment	Deadline	Penalty If Late
Corporation Tax registration	3 months from starting to trade	Up to £3,000
Corporation Tax payment	9 months and 1 day after year end	Interest + penalties
Corporation Tax return (CT600)	12 months after year end	£100-£1,600+
VAT return	1 month and 7 days after quarter end	Points system, then £200+
PAYE (FPS)	On or before each payday	£100+ per late filing
PAYE payment	22nd of following month	Interest + penalties

Your Personal Tax

Filing/Payment	Deadline
Register for Self Assessment	By 5 October after your first tax year as director
Self Assessment return	31 January (online) following the tax year
Self Assessment payment	31 January

Confirmation Statement - What It Is, When It's Due

The Confirmation Statement is an annual check-in with Companies House to confirm your company details are correct.

What it covers:

• Registered office address
• Director details (names, addresses, dates of birth)
• Shareholder details
• Statement of capital (share structure)
• SIC code (your business activity classification)
• PSC (Person with Significant Control) information

When it's due:

Your first confirmation date is your incorporation anniversary. You then have 14 days to file the statement. After that, you can choose any confirmation date, as long as you file at least once per year.

Filing fee: £34 online

The process:

1. Log in to Companies House WebFiling
2. Review the pre-populated information
3. Update anything that's changed
4. Pay and submit

This takes about 10 minutes if nothing has changed. Don't let the simplicity trick you into forgetting it.

Your First Set of Accounts

Preparing your first accounts feels daunting, but most small companies can file simplified accounts.

Do You Qualify as Micro or Small?

Micro-entity (simplest accounts) - meet 2 of 3:

• Turnover: Not more than £632,000
• Balance sheet: Not more than £316,000
• Employees: Not more than 10

Small company - meet 2 of 3:

• Turnover: Not more than £10.2 million
• Balance sheet: Not more than £5.1 million
• Employees: Not more than 50

Most new companies are micro-entities, meaning you can file:

• A basic balance sheet
• No profit and loss account publicly (prepare one, just don't file it)
• Minimal notes

What Your Accounts Must Include

Even simplified accounts need:

• Balance sheet showing assets and liabilities
• Statement that accounts are prepared under the micro-entity or small company regime
• Director's signature

Accounts Deadline for First Year

New companies get extra time. Your first accounts are due:

• 21 months from incorporation, OR
• 3 months after the end of your accounting period

Whichever is later. After your first year, it's always 9 months from year end.

Corporation Tax Return (CT600)

The CT600 is your company's tax return, telling HMRC how much Corporation Tax you owe.

What's Included

• Company details
• Accounting period covered
• Trading income and expenses
• Capital gains (if any)
• Tax reliefs claimed
• Tax calculation
• Company accounts (attached)

CT600 vs Corporation Tax Payment

This trips up many new directors:

Action	Deadline
Pay Corporation Tax	9 months and 1 day after year end
File CT600 return	12 months after year end

You pay the tax before you file the return. If you wait until the filing deadline to pay, you've already incurred 3 months of interest.

Filing Options

1. HMRC's online service: Free, but basic
2. Accounting software: Most packages can file directly
3. Accountant: Many directors use professional help for their first return

Corporation Tax rates 2025/26:

• 19% on profits up to £50,000
• 25% on profits over £250,000
• Marginal relief for profits between £50,001 and £250,000

Use our corporation tax calculator to estimate your liability.

Self Assessment as a Director

Being a company director doesn't exempt you from personal tax returns. In fact, it usually requires one.

You need Self Assessment if you:

• Receive dividends from your company
• Earn over £100,000 total income
• Have other income sources
• Are a higher or additional rate taxpayer

Your Personal Tax Calendar

Tax Year	Register By	File By	Pay By
2025/26 (April 2025 - April 2026)	5 October 2026	31 January 2027	31 January 2027
2026/27 (April 2026 - April 2027)	5 October 2027	31 January 2028	31 January 2028

What Directors Report

• Salary from the company (already taxed via PAYE)
• Dividends received
• Other income (rental, investments, etc.)
• Expenses you can claim (limited for directors)

The interaction between company tax and personal tax is where planning gets valuable. See our Self Assessment guide for directors.

The Optimal Extraction Strategy (Salary + Dividends)

How you take money from your company significantly impacts your total tax bill.

The 2025/26 Optimal Approach

For most director-shareholders:

Payment Type	Amount	Why
Salary	£12,570	Uses personal allowance, no income tax
Dividends	Up to £37,700	Taxed at 8.75% basic rate
Further dividends	Above £37,700	33.75% higher rate or 39.35% additional

Worked Example

Director taking £50,000 from company:

Option A: All salary

• Income tax: £7,486
• Employee NI: £3,046
• Employer NI: £5,149
• Total tax: £15,681

Option B: £12,570 salary + £37,430 dividends

• Income tax on salary: £0
• Employee NI: £0
• Employer NI: £0
• Dividend tax: £2,901
• Total tax: £2,901

The difference: £12,780 saved annually.

This is simplified. Your optimal strategy depends on:

• Company profits
• Other income sources
• Pension contributions
• Whether you need NI credits for state pension

See our salary vs dividends calculator for personalised figures.

Common First-Year Mistakes (And How to Avoid Them)

Mistake 1: Mixing Personal and Business Finances

The problem: Using your business account for personal expenses, or vice versa, creates a tangled mess.

The fix: Strict separation. Every personal expense paid from the business account becomes a director's loan that must be tracked and potentially repaid or taxed.

Mistake 2: Forgetting Director's Loan Implications

The problem: Money flowing between you and your company creates a director's loan account. If you owe the company money at year end (overdrawn DLA), there's a 33.75% tax charge.

The fix: Track every transfer. Plan dividend declarations to clear any balance owed. See our director's loan guide.

Mistake 3: Missing Corporation Tax Payment Date

The problem: Many directors think they have 12 months to sort Corporation Tax. The payment is due at 9 months and 1 day.

The fix: Set a reminder. Start estimating your liability at month 6. Set aside funds monthly.

Mistake 4: Not Keeping Receipts

The problem: HMRC can disallow expenses without documentation. That £2,000 laptop? Without a receipt, it might as well not exist.

The fix: Receipt every expense, immediately. Use an app. No exceptions.

Mistake 5: Paying Too Much Salary

The problem: Salary above £12,570 triggers income tax and National Insurance. Dividends are usually more efficient.

The fix: Take £12,570 salary, dividends for the rest (subject to profit levels and your circumstances).

Mistake 6: Ignoring VAT Threshold

The problem: Crossing £90,000 turnover and not noticing means late registration, back-dated VAT liability, and penalties.

The fix: Monitor your rolling 12-month turnover monthly. Register before you hit the threshold if you're close.

Mistake 7: DIY Without Understanding

The problem: Using accounting software doesn't mean understanding accounting. Miscategorised expenses, missing accruals, and botched reconciliations cause real problems.

The fix: Invest time in learning basics, or invest money in professional help. The middle ground of "software will sort it" leads to expensive corrections later.

Month-by-Month Checklist for Year One

Month 1

• Open business bank account
• Set up registered office
• Note all key dates
• Choose accounting software
• Start recording transactions immediately

Month 2

• Register for Corporation Tax (if trading)
• Consider VAT registration
• Set up receipt capture system
• Create invoice template

Month 3

• Register for PAYE (if paying salary)
• Set up payroll
• First salary payment (if applicable)
• Corporation Tax registration deadline (if trading from month 1)

Month 4-6

• Establish monthly bookkeeping routine
• First VAT return (if registered)
• 6-month financial review
• Catch up on any missed receipts

Month 7-9

• Start year-end planning
• Review salary/dividend split
• Consider pension contributions
• Prepare for Corporation Tax payment

Month 10-12

• File Confirmation Statement (around incorporation anniversary)
• Prepare annual accounts
• Corporation Tax payment (9 months + 1 day after year end)
• Register for Self Assessment (if not already)

After Year End

• File annual accounts with Companies House
• File CT600 with HMRC
• File personal Self Assessment
• Celebrate surviving year one

What Changes in Year Two?

The good news: year two is easier. The hard work of setting up systems is done.

Key differences:

First Year	Second Year Onwards
Accounts due: 21 months from incorporation	Accounts due: 9 months from year end
Setting up systems	Maintaining systems
Learning the process	Running the process
Everything feels new	Routine kicks in

Year two priorities:

• Refine your extraction strategy based on year one data
• Consider pension contributions
• Review your VAT scheme (Flat Rate? Cash accounting?)
• Think about year-end tax planning earlier
• Start planning for Making Tax Digital changes

Frequently Asked Questions

What's the first thing I should do after incorporating?

Open a business bank account. Everything else depends on having somewhere to receive money and pay expenses. Start this process immediately as it can take days or weeks.

How much does it cost to run a limited company in year one?

Budget for: company formation (£12-100), registered office (£0-150/year), bank account (£0-180/year), accounting software (£120-420/year), accountant if used (£300-1,000 for year-end), and Companies House filing fees (£34). Total: roughly £500-2,000 for a simple setup.

Can I run a limited company while employed full-time?

Yes, there's no legal restriction. However, check your employment contract for restrictions on outside business activities or conflicts of interest. You must still meet all company director duties regardless of time available.

What if my company doesn't make any money in year one?

You still need to register for Corporation Tax, file accounts, file a CT600 return, and file a Confirmation Statement. The good news: no Corporation Tax to pay if there's no profit. Losses can carry forward against future profits.

Do I need professional indemnity insurance?

Depends on your business. It's essential for professional services (consultants, IT contractors, accountants). It's often required by clients in your contracts. Even if not required, it protects against claims from unhappy clients.

How do I pay myself for the first time?

Set up payroll, register as an employer with HMRC, run your first payroll calculating tax and NI, pay yourself the net amount, file a Full Payment Submission, and pay HMRC by the 22nd of the following month. Many accounting packages guide you through this.

When should I hire an accountant?

Consider professional help if: your affairs are complex (multiple income sources, international elements), you don't have time to learn the basics, your turnover approaches VAT threshold, or you need tax planning advice. Many directors manage day-to-day bookkeeping themselves and use an accountant for year-end and tax advice.

What records must I keep and for how long?

Keep all financial records for at least 6 years from the end of the accounting period they relate to. This includes: invoices (sales and purchases), bank statements, receipts, contracts, payroll records, VAT records, and board minutes for dividend declarations.

How AccountsOS Helps

Your first year shouldn't feel like stumbling through a compliance minefield. AccountsOS is designed specifically for UK limited company directors who want to spend time on their business, not their bookkeeping.

Deadline tracking that works: Every deadline specific to your company, calculated from your dates, with alerts in good time. Confirmation Statement, accounts, CT600, VAT returns, all tracked automatically.

Receipts made simple: Snap a photo or forward an email. AI extracts the details, categorises correctly for UK tax purposes, and files it where it belongs. No manual data entry.

Ask anything: "Can I claim my home broadband?" "What's my Corporation Tax estimate?" "When's my VAT return due?" Get instant answers based on your actual data and current HMRC rules.

Bank integration: Connect your business bank account. Transactions import automatically. AI suggests categories based on patterns and UK tax rules.

Built for UK Ltd companies: Not a generic tool adapted for UK use. Every feature assumes you're running a UK limited company and dealing with HMRC, Companies House, and UK tax law.

£19/month: A fraction of traditional accountant fees. Available 24/7 to answer your questions and keep your records in order.

Your first year sets the foundation. Get the systems right, and everything else follows. AccountsOS gives you those systems from day one.

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Starting your first year with a limited company? Try AccountsOS free and see how much easier compliance can be.