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There are lots of benefits to contracting – a wide variety of work, no bosses to answer to, and infinite opportunity to work from home – but it can also be a complex world to navigate. We've clarified some of the important things you need to know.

All the confusing contractor terms explained

There are lots of benefits to contracting – a wide variety of work, no bosses to answer to, and infinite opportunity to work from home – but it can also be a complex world to navigate.

If you're thinking of making the jump to self-employment, or if you're already freelancing but finding the jargon intimidating, we've clarified some of the important things you need to know when it comes to contracting in the UK.

Company structure – Refers to the way you decide to set up your business. You can opt to set up as a Limited Company, be a Sole Trader or enter in to a Partnership, all of which have different advantages and disadvantages.

Limited Company – A company that is its own legal entity. As an owner, you will be legally responsible for a Limited Company's debts only to the extent of the amount of capital you invested upfront.

Sole Trader – A structure that is inextricably linked to you as the owner. So, you keep all profits (ie. no shareholders involved), but you are also personally responsible for any losses the business might incur.

Partnership - Similar rules to that of a sole trader, however the responsibility for your business is shared between you and your partner (or partners).

IR35 – A piece of tax legislation coming into effect on April 6th 2020, which aims to identify and limit the number of people acting as employees, but benefiting from being paid as contractors. To learn more about what IR35 has in store and how it could affect you, feel free to reach out to one of our accountants for a chat.

Payroll – Payroll is a list of a company's employees and the amount of money they are to be paid. As a contractor or a limited company director, you need to run payroll every month in order to be compliant with PAYE.

PAYE – 'Pay As You Earn' refers to the income tax system in the UK, where employers make income tax and national insurance payments on behalf of themselves and their employees, deducting the necessary amount from their monthly salary. As a contractor, you will have to submit this yourself every month when you complete payroll through RTI.

RTI – RTI, or Real-Time Information, was introduced in 2013 to make PAYE submissions more efficient. Instead of submitting PAYE taxes (national insurance and income tax) at the end of the year, RTI requires information to be submitted in real time, every time you pay yourself (or your employees).

Dividends – As the owner of a limited company, you have the ability to declare dividends: profit (after corporation tax) which gets paid out to shareholders (ie. you). Because dividends are typically taxed at a lower rate than a salary, it may be more tax beneficial to work out an optimum balance of the two. Partnerships and sole traders cannot pay dividends. Make sure to reach out to us, so we can help you pay yourself in the most tax effective way.

Making Tax Digital – In an effort to make it easier for businesses and individuals to "get their tax right and keep on top of their affairs," HMRC has gone paperless. Currently only applicable to VAT and self-assessment, MTD involves keeping digital records and using software to complete tax returns.

Tax return – Your tax return is a document declaring your liability to be taxed and your claims to tax relief, lodged yearly with HMRC. Filing a tax return as an individual is also called self-assessment, and for an organisation, it is referred to as Corporation Tax. As an individual, you won't need to send a return if your only income is from your wages or pension, but you may need to if you have any other untaxed income, such as property rental income, tips and commission, income from savings, investments and dividends, or foreign income.

Tax rebate – This is money you'll get back from HMRC if you have overpaid in tax during the tax year, or over a period of a few years. HMRC will send you a P800 letter informing you if you're due a rebate, but you will still need to claim it yourself.

Expense categorisation – When you lodge your corporation tax at the end of the financial year, you need to categorise every expense you've incurred – from phone bills to travel costs to food and drink, etc – into a category. This is traditionally a very time-consuming and laborious process, which is why we're allowing you to keep up to date straight from your bank feed. Head to the understanding our categories guide to see a description of each category, and what you can and can't claim.

We're creating a future where independent businesses can thrive without the need for an accountant – and as accountants ourselves, we're pretty damn excited.

Tax-tech startup Ember has closed a £1.6 million seed round to scale the company's vision of making it possible for anyone to start and run a business.

Ember raises £1.6 million to redefine the future of small business.

Today we are super excited to announce our seed funding round of £1.6 million, led by FinTech VC Anthemis.

Founded in February 2019, Dan and I started Ember with a vision to make it possible for anyone to launch, operate and grow a business. As we close this funding round, we couldn't be more excited to be one step closer towards realising that goal. By bringing clarity and transparency to the tax process for small business owners, Ember democratises accounting and empowers entrepreneurship – at a time when small business is more important than ever.

Led by FinTech venture investment firm Anthemis, the round is geared towards product development, recruitment and customer acquisition. Having achieved proof of concept and organic customer growth since our pre-seed round a year ago, we're now ready to bring on customers at scale and expand the progressive functionalities of the platform.

Born from personal frustration with the current accountant/client relationship, which is costly, time consuming and leaves business owners feeling disempowered, Ember is designed specifically with business owners, not accountants, in mind.

As the shape of our economy and workforce changes, we're making running a business simple enough for anyone to do – from incorporation to close, and everything in between.

Alongside Anthemis, VC funds Innovation Nest and Spring Ventures have backed us. Ruth Foxe Blader, Partner at Anthemis, says, “Ember has the opportunity to modernise small business tax preparation and accounting. Anthemis has a history of backing companies that support SME commerce, the backbone of the global economy. Especially as the pandemic strains entrepreneurship, we’re thrilled to support this progressive team.”

As we begin the next step in our journey with the support of our new investors, we can't wait to bring our transformative financial experience to more small business across the UK and help unlock their potential.

We have raised £1.6 million to redefine the future of small business

It's a big bad world out there for contractors, but we're here to light the way, and lighten the load.

If you're finding it difficult to know where to start your journey as a contractor, start here: our simple 6-step guide to setting yourself up as a contractor.

6 simple steps to start your company as a contractor

So, you've decided to make the exciting leap from employee to contractor. You've secured your first contract and celebrated accordingly, but now's the time to get everything set up before you sign on the dotted line.

The process of setting up as a contractor can be daunting. If you've always worked as an employee, you've likely never have needed to worry about the admin things like accounting, insurance or setting up a company.

We've been contractors before and we know first-hand how tricky getting set up can be. That's why we've put together this handy guide to help simplify it all for you.

There are rules for company names which you can check here. Company names also have to be unique, you can check if your name is available here.

Directors have responsibilities such as paying Corporations Tax and keeping company records, you can familiarise yourself with the full list here. You can also check the records you'll need to keep here.

You'll need to register an official address and choose an SIC code which identifies the products or services your company provides. You can check the rules for a company address here and choose the correct SIC code here. To register your company with Companies House you'll need to follow this link.

Opening a business bank account can often be more complicated and time-consuming than you'd expect. Additionally, the process can differ greatly between banks. In order to register for a business bank account you'll need the following:

Proof of ID (passport, photo driving license or national ID card)

Proof of address (utility bill, council tax statement, recent bank statement).

Full business address (including postcode)

Companies House registration number (for limited companies and partnerships)

It's also important to choose a bank that suits your business needs. Top tip: we'd recommend checking out Money who have put together a great comparison of business banking products.

HMRC requires you to register for VAT if your VAT taxable turnover goes above £85,000, or if you know that it will. Your VAT taxable turnover is the total of everything sold that is not VAT exempt. You can also register voluntarily if your business turnover is below £85,000. You must pay HMRC any VAT you owe from the date they register you.

Most businesses can register for VAT online here.

IR35 is comprised of two sets of tax legislation designed to combat tax avoidance by contractors and the companies hiring them. It's intended for contractors who are supplying their services to clients via an intermediary, such as a limited company, but who would for all intents and purposes be an employee if the intermediary wasn't being used.

If you are deemed by HMRC to be working as an employee under IR35 you'll have to pay income tax and National Insurance Contributions, as if you were employed.

The good news is that as a contractor, you aren't responsible for determining your IR35 status. That responsibility falls to the company hiring you.

It's important to insure yourself as a contractor. There are two popular types of insurance cover for contractors: Professional Indemnity Insurance, which covers you in the event that you give faulty advice that might cause financial loss to a client, and Public Liability Insurance, which covers you if someone becomes injured or their property becomes damaged because of your business.

You can compare business insurance services here.

Last but not least, accounting is regularly a pet frustration for contractors. When it comes to making sure you're financially compliant, you can either go it alone and navigate the complex accounting system yourself – which is often confusing, time consuming and opaque – or you can hire an accountant to do it for you at considerable cost. As of recently, however, there's a third option: Ember is the first platform to completely automate the accounting process for contractors and SME's. It's simple and intuitive software that shows you only what you need to see – like how much tax you owe and when it needs to be paid – and does all the complicated stuff in the background. Expenses will be automatically categorised and your VAT returns, taken care of. It's seriously great!

6 simple steps to setting up your company as a contractor

You too can wear the finance hat without having to rely on the overpriced accountant 👔

Contractors, did you know that it PAYS to work from home and throw your own Christmas party? Check out our top 10 little-known expenses that can save you money in tax deductions.

Tax-saving hacks for contractors

Running your own company as a contractor can be intimidating, but things like tax and knowing what to claim can be downright scary. As a contractor or small business owner, you're obliged to pay the correct amount of tax to HMRC. You know this already, but what you might not know is that there are a handful of really easy ways to win back cash on tax-deductible expenses, such as working from home and splashing out on a Christmas party.

Another common misconception is that you need an accountant to push the submit button for you. False – you can totally do it yourself. As ever though, HMRC's guidance can be murky, and full of nondescript words like ‘reasonable' and 'fair'. The goal of this article is to help you feel 100% confident in making the decision yourself on what you can and can't claim. When you have all the facts, it becomes second nature.

So, with that in mind, read on for our top 10 unknown expenses that can save you money in the long term as a contractor.

If you work from home – even if that constitutes clearing emails for just two days a week, or running the books once the kids have gone to sleep – you can claim a deduction on certain living costs. For example, if you dedicate your study exclusively to business use and choose to spruce it up with a coat of paint, that's deductible as a direct expense. Equally, things like rent, mortgage interest and real estate taxes can be claimed in proportion to the amount of time you spend using that space for business purposes.

To go the easy way for contractors, HMRC have a flat rate that can be used which allows you to claim £4 a week on home office use, meaning a total allowance of £208 can be deducted for the year.

For homeowners however, you can claim a higher amount as long as you put together a rental agreement between you and your limited company. You'll also need to make sure the amount charged isn't OTT and that you have a dedicated study for your business.

If your mobile phone contract is in your company’s name (and you're mindful about your personal use), the full cost of that contract is tax-deductible. Similarly, if you have a broadband box at home that you use for work, that's cash back in the bank. If you're old-school and love a landline, you'll need to prove that calls you claim on have been made for business purposes. In this case, it might be better to set up a landline dedicated to the company – just be sure that the bills are addressed to the company rather than you as the business owner.

How much can you claim?  If you register mobile phone and broadband contracts in your company's name, you could benefit from a couple of hundred quid's worth of tax savings a year, depending on your rates.

Thankfully as a contractor working on-site, the stress of the Central Line (or whatever might constitute your daily commute) can make its way back to you as a tax deduction. This is because, as a contractor, the business you're working for is technically a client. Careful though – if you're a small business owner traveling to your own office rented by your company every day, that commute unfortunately isn't deductible.

Any trips outside of daily business definitely represents a saving, such as taking a Kapten across London to see a different client or booking flights to a conference in Milan. And when you're in Milan, don't forget to claim back on your hotel, your meals whilst you're there and any fuel, hire or parking charges you might rack up. On top of travel-specific expenses, you can also claim on tips, phone calls or shipping costs you might incur in getting samples or equipment over there. It goes without saying, but keep those receipts safe!

How much can you claim? If you're traveling to your clients office every day, that's on average a deduction of £8 a day (£2,024 per year)! Then, if you're averaging two other offsite client meetings in London per week and one overnight business trip away per year, you could make an extra annual tax deduction in the realm of £800's+.

It might surprise you that as a contractor working from your clients office, you can treat yourself to lunch from your favourite chain and expense it. You just need to make sure you're not having too much of a laugh and keeping it within the limits of company policy (which you lay out when setting up the business).

How much can you claim? An average spend of around £5 per day can be deducted, so with 253 working days in the year that's a total potential for £1,265 in deductions that can be claimed.

Any training courses or materials that help you improve your skills as a contractor are tax-deductible. And with that, of course, comes travel and food expenses you'll need to pay for whilst on a course. Watch out though, HMRC can be a bit sticky with training – they don't like MBAs or courses where the focus is on learning new skills as opposed to building on those that you already have. So for example, if you're starting your own fitness studio, you won't be able to claim on your personal training or yoga instructor's course as you'll be learning it for the first time, but go wild with refresher courses or anything that might update your existing knowledge.

How much can you claim? Training courses can range from anywhere between £50 up to £500, which can be claimed in sweet deductions.

In the UK, there is something called the Tax-Free Childcare Scheme, which is a serious win if you're a contractor with little ones. Provided that you're in work and not on maternity or paternity leave, the government will pay 20p for every 80p you put into childcare, up to a max threshold of £2000's worth of savings, or until your child turns 11. Given that childcare can easily cost £240 per week, this is a no brainer.

How much can you claim? Up to £2,000's worth of savings.

7. Work events, such as Christmas parties

That's right – it pays to get festive and don those dusty reindeer ears. Provided that your per-head spend doesn't exceed £150 (that can be for one event, or spread across a few throughout the year), those expenses can be claimed as a business deduction and are exempt from both tax and National Insurance. So if it's just you working for the company, treat yourself and your partner (as they get £150 allowance as well) to a lavish Christmas dinner (we know a couple spots where £150 will get you prettty far #spoons), and if you have a couple of employees in tow, we've put together a list of ideas for Epic Small-Business Christmas Parties soon.

How much can you claim? £150 deduction per person in attendance (remember you get an extra £150 for a partner if you want to bring them along).

Any kind of marketing that drives business your way is tax-deductible, and that includes paying to promote posts on Instagram and LinkedIn. Getting your name out there is often one of the most challenging elements of contracting, and costs can climb quickly. Luckily, everything from paid search to business cards – and even a new website – contributes to your tax saving. If you're in need of some inspo, sign up for our Complete Guide to Marketing Yourself as a Contractor, dropping soon.

How much can you claim? Will depend on how much attention you pay to promoting yourself, however a main one to keep in mind is the cost of LinkedIn Business Premium for around £45 a month.

Keeping healthy is healthy for your bank balance and tax position, particularly if what you do involves a lot of staring at screens. Eye tests and health checks are tax-deductible, as are the costs of contact lenses or prescription glasses, provided they're used exclusively for screen time. Finally, a reason to invest in two pairs of glasses – one for home 😎and one for work 🤓.

How much can you claim? Average spend on a pair of glasses is around £50 and a private yearly medical check up can be anywhere between £100 to £500 depending on the extent of the MOT. It pays to keep the health in check.

10. Professional magazine or journal subscriptions

Occupation-specific magazine subscriptions, journals and books can be claimed as a limited company expense. For example, if you’re the a contracting editor of a photography magazine and you have a subscription to a rival title, you should be able to claim the cost of this as a business expense as it’s a way for your business to keep up to speed on industry trends and your competition.

How much can you claim? On average, professional subscriptions to magazines range from £10 to £30, meaning that you can claim up to £360 per year as a deduction.

If you keep these 10 simple things in mind when completing your corporation tax return, you've potentially claimed an extra £10k worth of deductions. However, knowing what to claim is only half the battle – how can you be sure the numbers are correct from start to finish?! That's where Ember comes in: a simple software that tracks, manages and submits the numbers to HMRC. It's the glue that holds it all together, and an accounting and tax platform that finally speaks to you in your language.

The government has announced a 12-month delay to the IR35 regulations, which were due to come into force next month.

Some good news amongst the coronavirus chaos: IR35 has been delayed.

As the UK enters a period of lockdown due to Covid-19, the government has announced a 12-month delay to the IR35 regulations, which were due to come into force next month. All across the UK, contractors are breathing a slight sigh of relief.

In a nutshell, IR35 is legislation that aims to clamp down on tax avoidance by contractors 'disguised' as employees, i.e. working in organisations on a long-term basis and essentially providing an equal service to permanent staff. By forcing companies to pay NI and PAYE for contractors, the legislation will make it far more costly for companies to keep self-employed people on their books, resulting in a massive reduction of contracts available for the freelance population.

As businesses brace for the storm of uncertainty coming down the track, this is a much needed win for the self-employed. It will allow contractors to focus their energy on the wider challenges set to impact society, without having the extra burden of these rules hanging over their heads.

Although the Government has insisted that this is very much a delay and not a cancellation, we are excited by the prospect that contractors can continue to earn good day rates without falling inside the rules. As the economic situation becomes increasingly precarious in the midst of coronavirus, this gives contractors room to breathe and time to properly prepare for the IR35 changes now due in April 2021. It also gives affected firms time to initiate reform in ways that work for them and the freelancers they hire.

As ever, we're here to support your needs as a contractor. As you look ahead to another year of contracting, think about making the switch from your expensive accountant (or the trials and tribulations of managing your books yourself) to a system that automates your accounting and tax. Or if you're now in the position where you're thinking of making the plunge in to accepting a contract, we can help you set up your business.

Ember is a software that makes running a business easy and intuitive for anyone: we automatically categorise your transactions, bringing them into one central feed and show you your real-time tax position at all times so that you're never surprised when the taxman comes knocking.

IR35 delay: Some respite amongst the COVID-19 chaos

So that you can spend less time number-crunching and more time Christmas-lunching.

Few contractors are aware that it actually PAYS to throw your own Christmas bash, even if that's just you cosying up to a roast and bottle of red in your favourite pub.

Last minute Christmas Party ideas for contractors

It's that time of year again, and let me guess...

As a contractor, you're looking on at your employer's Christmas party plans, nonchalantly laughing off the 'full-time employees only' rule whilst secretly lamenting the missed opportunity to get festive for free?

No need! Few contractors are aware that it actually PAYS to throw your own Christmas bash, even if that's just you cosying up to a roast and bottle of red in your favourite pub. Provided that your 'per-head spend' doesn't exceed £150, an annual work event is totally tax-deductible. Even better, that counts for your taking a partner or friend as well.

Read on for five ways to stretch a pp budget of £150 into some epic Christmas party ideas for contractors and small-business owners.

It's an obvious choice, but why not treat yourself to a swanky meal at one of London's finest establishments? You could opt for a classic: the champagne pairing menu at The Savoy Grill comes in at £140 per person and Heston Blumenthals' dinner menu at Dinner and dinner at £105 each. Or, you could be a true baller and order every small plate on the menu at one of London's trendiest new hotspots, like Flor for a seasonal British feast, Caractère for stylish 'mood food' or Silo for zero-waste indulgence.

Immersive entertainment at its best, a Secret Cinema ticket will cost you around £65-85, leaving a healthy budget for pre-game nibbles and a steady flow of drinks whilst there. For anyone unfamiliar with the concept, think cult film classics brought to life at fantastic scale, inviting you in to participate in the plot before the opening credits roll. It makes an epic activity for a small team, or a great Christmas-party-meets-date-night for those flying solo.

If London's good for anything, it's an ever-expanding list of places attaching activities to alcohol. Take your team to any of Swingers' underground mini-golf locations for a guaranteed laugh, or play pastis-fuelled pétanque at Baranis in Holborn. Electric Shuffle does for shuffleboard what Flight Club did for darts, whilst Skate Dine Bowl in Queensway takes it all to a new level: if ice skating, curling, bowling lanes and arcade games all wrapped into one doesn't shout 'Christmas party extravaganza', we're not sure what does.

Celebrating Christmas whilst sharpening your cooking and cocktail-making skills = seriously good bang for you buck. There are some excellent once-off cooking classes in London: Wright Brothers does an oyster masterclass for £65 per person, and E5 Bakehouse's sourdough bread-making costs £150. There's also nothing quite like making a meal together to encourage team bonding. If you'd rather try your hand at mixology, book yourself in at TT Liquor in Shoreditch is fantastic for two hours of making (and drinking) cocktails.

And if you're still lost for ideas (or can't be bothered to plan), there's always the trusty fallback of a good old night on the town. Be it a pub crawl, Christmas karaoke or a sticky dance floor special,  you can't go wrong, as long as you keep those receipts safe (which could become trickier as the night progresses). We'd recommend Brilliant Corners for London's sweetest sound system, Piano Works for a crowd-pleaser and Ridley Road Market Bar for gloriously grungy old-school beats and ginger mojitos.

There you have it: Christmas for contractors, sorted. For more tips on what you can and can't claim, check out our top 10 Tax Hacks.

A limited company is a business that is legally separate from the people who own and run it, with different tax rules and regulations to sole traders.

What is a limited company?

Whether you're changing from a sole trader to a limited company or are establishing a new company or startup, it's important to know the key facts about limited companies, including the legal stuff, your tax obligations, and how to prepare accounts for HMRC.

There's a lot to take in when it comes to limited companies, but once you've grasped the basics of filing a Company Tax Return and submitting annual statutory accounts, the whole process becomes a lot clearer. The key thing is to stay on top of your financial reports and accounts, not just for HMRC, but to track the financial health of your business.

Running a limited company comes with several work perks, from reduced financial liability and lower rates of tax (companies pay a flat rate of 19% Corporation Tax rate, compared to sole traders or partners, who can pay up to 45% income tax), to tax reliefs and flexibility.

In this article, we'll cover exactly what a limited company business structure is, bust the jargon around accounting periods and financial years, and explain when to pay VAT and Corporation Tax. If you decide that you want to form your own limited company, Ember will handle the whole company formation process for you.

A limited company is a business that is legally separate from the people who own and run it: its shareholders and directors. As the company is recognised as a distinct legal entity accountable for its own finances and business actions, the business owners have limited liability for any business debts and losses incurred, meaning that their personal finances are safe if the business fails. The company's shareholders usually receive a share of profits in the form of dividends.

As the company director, you'd only be liable for its debts if:

you personally 'guaranteed' any of the business's loans, meaning that you promised to sell your personal assets or use your own money to settle unpaid debts

you sold company assets for below market value (or gave them away for free) when they could have been sold to repay creditors

Your business's legal status as a limited company means that it can:

sue and be sued (if someone initiates a lawsuit against a limited company, they have to sue the company itself rather than its shareholders or directors, which protects you against financial loss)

Your company's limited company structure also means that if the business becomes insolvent (falls into financial difficulty) and can't pay its creditors, you won't be financially responsible.

Instead, your company can be 'wound up' (liquidated), which is a form of bankruptcy for businesses, where – after assets have been sold to pay off creditors as much as possible – all remaining debts are written off, and your business is struck off the register at Companies House.

Once you've registered your limited company, you'll receive a certificate of incorporation. This document proves that you've set up your company correctly and that it is a separate legal entity from you: the shareholder and/or director.

When it comes to the most common form of a limited company in the UK: 'limited by shares', shareholders are the owners.

Shareholders nominate directors to manage the operations, finances and administration of their limited company, from paying tax to running payroll. Shareholders can also nominate themselves as directors.

You don't have to run a vast business empire with multiple shareholders to own a limited company. Often, limited companies start as self-employed one-man bands, with a single shareholder (who owns 100% of the shares) and who is also the director.

Anyone who owns more than 25% of shares, 25% of voting rights, or has the right to appoint or remove directors in your company must be recorded on the People with Significant Control (PSC) register at Companies House, which keeps track of who owns and controls limited companies. 

While shareholders own a limited company, the business's separate, legal identity means that shareholders have no financial liability for the company beyond the 'nominal value' of their shares. This means they won't have to pay any money beyond this value if the company fails. 

The nominal value is an amount of money assigned to a share – usually very low, around £1 – when a shareholder takes ownership of it. This amount is purely for accounting and records purposes and is unconnected to the real, market value of a share (which is how much it would go for if sold on the market).

When a company is incorporated, shares get allotted to each shareholder (this is called issuing share capital). The nominal value of all the company's shares represents its total share capital. 

For example, if your company issues 100 shares at £1 each, it has a share capital of £100. If the company is forced to close, each shareholder will have to pay the nominal value of the shares they own. In this case, you have four shareholders who each own a quarter of the company's shares, they can expect to pay £25 each if the company is liquidated. 

As your company's share capital does not reflect its actual, market worth, the nominal value of the business's shares is what gives you limited financial liability when it comes to the company's debts and losses. Again, you're unlikely to pay more than a few pounds in share capital if the company is liquidated.

While sole traders and partners pay Income Tax, limited companies have to pay Corporation Tax on their profits. 

The Corporation Tax rate is currently 19%, which means that if your company made a profit of £75,000, you'd have to pay a £14,250 Corporation Tax bill. 

You're allowed to deduct the cost of certain products and services you buy for your business, as well as bills you have to pay, from the total amount of your company's profit. This means that you'll have less profit to report, and therefore less Corporation Tax to pay. The costs you're allowed to deduct are called 'allowable expenses' and include: 

rent and utility bills for business premises 

legal fees (if incurred through your ordinary trading activities) and accountancy costs 

With Ember, you can easily categorize your expenses, saving you hours of laborious calculations. Using our app, you can enter a transaction as, for example, 'client entertainment' or 'office stationery', and our system will immediately sort it as an allowable or disallowable expense, adding back or deducting its value from your tax bill.

With our real-time view of your estimated Corporation Tax bill, you'll always know exactly how much money to ringfence for tax, avoiding any annoying surprises when your tax is due.  

Most limited companies have a deadline of nine months and one day after the end of their Corporation Tax period (see our section 'accounting periods for limited companies') to pay their tax bill.

However, your Company Tax Return – which you use to detail the amount of Corporation Tax you owe - is due 12 months after the end of your accounting period for Corporation Tax. 

From the first of April 2023, you'll be taxed 25% on any profits between £50,000 and £250,000. Profits up to £50,000 will still be taxed at 19%. 

If your company made a profit of £75,000 after April 2023, you would pay: 

£9,500 in Corporation Tax on the first £50,000 (19%) 

£6,250 in Corporation Tax the remaining £25,000 (25%) 

This would give you a total Corporation Tax bill of £15,750. 

Accounting periods for limited companies

When it comes to limited companies, there are two key periods that define how you report and pay tax. These are your: 

Corporation Tax Period (also referred to as your 'accounting period for Corporation Tax'). You have to submit your Company Tax Return and calculate your Corporation Tax bill according to this period, which can't be longer than 12 months. The amount of profit you make as a business in each Corporation Tax Period is what determines how much Corporation Tax you pay.

accounting period for filing annual statutory accounts (also called your 'financial year'). You have to submit yearly accounts (which report the financial state of your business) to Companies House for this period. 

Your accounting period for annual statutory accounts usually covers 12 months, and you can make this the same 12 months as your Corporation Tax Period, simplifying the submission of your statutory accounts and Company Tax Return.

However, your accounting period for annual statutory accounts may sometimes be longer than 12 months (whereas your Corporation Tax Period can't go over 12 months). In your company's first year of business, your accounting period for filing annual accounts will run from the date of your company's incorporation to the final day of the month of your company's incorporation the following year. This is called your Accounting Reference Date. 

For example, if your company was incorporated on the 15th April 2021, your Accounting Reference Date would be the 30th April 2022, because that is the last day of the month in which your company was incorporated. This makes your first accounting period for statutory accounts 12 months and 15 days. 

In this situation, as your Corporation Tax Period can't run for longer than 12 months at a time, you will have to submit two Company Tax Returns. One which covers the 12 months of your accounting period for filing annual statutory accounts, and one which covers the extra 15 days. 

After your first year of business, your accounting period for filing annual statutory accounts will usually run for the standard 12 months – in this case, from the 1st May 2022 to the 30th April 2023. If you do decide to lengthen this period (you're allowed to extend your financial year up to 18 months every 5 years), you'll have to submit more than one Company Tax Return to cover the whole timeframe. 

Tax obligations for directors of limited companies

If you're the director of a limited company, you may need to submit a Self Assessment tax return if: 

you're repaying a student loan that isn't taken out through PAYE 

you're receiving interest through shares or getting paid in dividends  

HMRC has sent you a notice to send a tax return. If you don't think you need to send a return (for example, because all your income is taxed through PAYE), get in touch with HMRC and ask them to withdraw the notice, otherwise, you could be penalised for not filing, even if you don't owe tax 

If you receive any income which isn't taxed at source (deducted from your salary and given to HMRC before you're paid), this usually means you have to send a Self Assessment tax return. 

However, if you're a director whose only income is taxed through PAYE at your limited company, HMRC has agreed that you do not need to file a return. 

Ember can prepare and file the Self Assessment tax return for the director of your limited company, saving you the hassle of dealing with HMRC and letting you get on with running your business. 

If your limited company uses a non-domestic property (such as an office) for its business activities, you may be charged a form of tax called business rates. Non-domestic properties including: 

holiday homes (available for let more than 140 days or more each year) 

are usually subject to business rates. The amount you have to pay depends on your local authority, which charges you on the value of any building or part of a building that you use for business purposes. 

If your limited company made over £85,000 in VAT taxable sales (products or services you've sold which aren't VAT-exempt) in the last 12 months, you'll need to register for VAT. VAT is a flat-rate, 20% tax which you have to charge customers on most things they buy, and then pay to HMRC. 

If you know your business will exceed the £85,000 threshold in the next 30 days, you'll also need to register for VAT. 

Cash flow can be unpredictable when running your own company. If your business only temporarily breaches the £85,000 VAT limit and you know it'll remain under the deregistration threshold for the next 12 months, you can contact HMRC to request a registration exemption, to save you from paying VAT. 

You have to submit all your VAT returns and payments online, due to the government's new Making Tax Digital (MTD) scheme. Unless you're exempt from MTD, for example, due to religion or disability, you have to use third-party software to file your return.

Ember – one of the government's MTD-approved software – will calculate all your VAT charges and transactions on your behalf, submitting returns seamlessly to HMRC. We couple smart automation with human expertise, so you'll always have the advice of a real-life, qualified accountant on tap. 

PAYE and National Insurance contributions

If you plan on employing anyone in your company, you have to pay taxes and National Insurance on their behalf through payroll. You'll also need to register as an employer with HMRC.

As well as deducting your employees' taxes and National Insurance, you have to record their pay, and submit all information on wages, tax and National Insurance, student loan repayments, and pensions to HMRC in what's called a Full Payment Submission (FPS). 

The government has also brought in a Real-Time Information (RTI) scheme, which means that you have to report to HMRC every time an employee is paid, not just on an annual basis. 

Ember helps you run every aspect of payroll, including submitting RTI on employees' pay to HMRC, producing P45s and P60s, and displaying PAYE, National Insurance contributions, and pensions in one central feed. Our handy reminders will keep you to date with your payroll obligations, and make sure you report to HMRC on time, every time. 

Company Tax Returns and annual statutory accounts 

When it comes to running a limited company, your Company Tax Return and your annual statutory accounts are some of the most vital documents you'll use and submit, so it's important to get them right.

As we covered earlier, your company tax return details the amount of Corporation Tax you owe for your Corporation Tax period (also called your 'accounting period for Corporation Tax'). 

To submit your Company Tax Return, you'll need your company's annual accounts and taxable profit. Taxable profit is the amount of profit your company has made in its Corporation Tax Period that can be taxed, after excluding any allowable losses – financial losses that you're allowed to remove from the profits you report – and tax-deductible expenses.

You'll also need a Government Gateway user ID and password, and your Companies House password and authentication code (if you're submitting your Company Tax Return and annual statutory accounts in one go). 

Your Company Tax Return contains what's called a CT600 form. This form will ask you standard questions about your company, the Corporation Tax period the return covers, and your business's turnover, profits (excluding allowable deductions), and losses. The form can seem quite long (11 pages), but there's no need to feel daunted, as you should have all the information to hand as long as your company has kept careful accounts. 

Ember's team of expert accountants will prepare your Company Tax Return at the end of your company's financial year, saving you the stress of complex calculations and letting you get on with running your business. 

Our real-time tax view also gives you constant access to your estimated end-of-year Corporation Tax bill, so you always know where you stand with the taxman. Our clever system automatically calculates your add-backs (expenses that aren't tax-deductible) and tax deductions, so you know exactly how much you'll owe to HMRC, and how much money to set aside. We'll send you useful tax notifications ahead of time, so you're aware of your obligations ahead of time. 

At the end of your financial year, your limited company has to submit annual statutory accounts to Companies House, which are prepared from your company's financial and accounting records. 

In this article, we've created a step-by-step guide on registering as a limited company, what the advantages of running your business as a limited company are, plus access to our company name availability checker.

How to register a limited company

Got a groovy company name in mind? Before you get your heart set on it, check to see if it's available first with our handy company name checker.

As a business owner, you might be wondering whether or not you should change from operating as a sole trader to a limited company. Although there are many factors to consider, the process of changing your company's business structure isn't as complicated as you might think. 

There are many benefits of registering as a private limited company. It could be that you want to give your new company or startup a more professional and structured image or are trying to grow your client base. There are also tax advantages that may help you save money and increase profits.

If you're confused about the tax and VAT options or wondering about the overall costs, there's no need to worry. You can use the tools and services on Gov.uk and Ember to help simplify the process and let you choose the best model for your business.

In this article, we'll walk you through the process of registering as a limited company and the subsequent changes in how you run your business. If you decide that becoming a limited company is for you, Ember can help with the company formation process for free, with a company name generator that can help you check to see if your chosen trading name is available. Click here to get started.

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