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UK Tax Guide 2025/26

Complete LTD Company Director Tax Guide

Everything you need to know about running a UK limited company, paying yourself tax-efficiently and meeting your Companies House and HMRC obligations. Updated for 2025/26.

⚠ Important disclaimer This guide is for informational purposes only and is not professional tax or legal advice. Limited company rules are complex — consult a qualified accountant before making decisions.

Contents

  1. 1. What is a LTD Company Director?
  2. 2. Corporation Tax — What Your Company Owes
  3. 3. Director's Salary vs Dividends
  4. 4. Allowable Company Expenses
  5. 5. VAT Registration
  6. 6. Key Filing Deadlines
  7. 7. Personal Tax Return (SA100) as Director
  8. 8. Making Tax Digital for LTDs
  9. 9. Official HMRC & Companies House Resources

1. What is a LTD Company Director?

A limited company (LTD) is a separate legal entity from its directors and shareholders. It has its own bank account, contracts and tax obligations. You, as director, are an employee of the company — even if you own 100% of it.

Most contractors, freelancers and business owners use a LTD company for tax efficiency: the company pays Corporation Tax on profits, then you extract money via salary and dividends.

Key facts:

  • Corporation Tax rate: 19% (profits up to £50,000) or 25% (over £250,000) — 2025/26
  • Dividend Allowance: £500 tax-free (2025/26)
  • You must file accounts with Companies House AND a Corporation Tax return with HMRC

2. Corporation Tax — What Your Company Owes

Your limited company pays Corporation Tax on its taxable profits. The rate depends on the size of the profit:

Up to £50,000 profit19% (small profits rate)
£50,001 – £250,000 profitMarginal relief (19%–25%)
Over £250,000 profit25% (main rate)

⚠ You must pay Corporation Tax within 9 months and 1 day of your company's accounting period end. The CT600 return must be filed within 12 months.

3. Director's Salary vs Dividends

Most director-shareholders take a low salary (at or near the NI threshold) plus dividends from post-tax profits. This is the most tax-efficient structure for 2025/26:

Optimal salary 2025/26

£12,570/year (personal allowance level) — avoids Income Tax. No employer NI below £5,000. Or £9,100 (Secondary threshold) to avoid all NI.

Dividends

First £500 tax-free. Above that: 8.75% (basic rate), 33.75% (higher rate), 39.35% (additional rate). Dividends come from post-Corporation Tax profits.

💡 The exact optimal split depends on your personal income, other income sources and whether the company qualifies for Employment Allowance. An accountant can model this for you.

4. Allowable Company Expenses

Costs incurred wholly and exclusively for business purposes can be claimed against the company's profits, reducing Corporation Tax.

Staff & directors

  • Director salary and PAYE
  • Employer pension contributions
  • Staff training and development

Office & equipment

  • Office rent or home office costs
  • Computer and equipment
  • Software subscriptions

Travel & vehicles

  • Business mileage (45p/mile)
  • Train, flights and accommodation
  • Company vehicle running costs

Professional fees

  • Accountancy fees
  • Legal fees
  • Business insurance

Marketing & sales

  • Website and hosting
  • Advertising costs
  • Client entertainment (50% meals)

Financial costs

  • Bank charges
  • Loan interest (business loans)
  • Foreign exchange fees

5. VAT Registration

If your company's VAT-taxable turnover exceeds £90,000 in any 12-month rolling period, you must register for VAT. You can also register voluntarily below this threshold.

Standard VAT Accounting

Charge 20% VAT on sales, reclaim VAT on business purchases. File quarterly VAT returns via Making Tax Digital-compatible software.

Flat Rate Scheme

Pay a fixed percentage of your gross turnover to HMRC. Simpler admin. Useful if you buy few VAT-rated goods.

Cash Accounting Scheme

Pay VAT when customers pay you, not when you invoice. Better for cash flow if clients are slow payers.

6. Key Filing Deadlines

9 months + 1 day
After accounting period end — pay Corporation Tax
12 months
After accounting period end — file CT600 with HMRC
9 months
After accounting period end — file statutory accounts with Companies House
31 Jan
Personal Self Assessment deadline (SA100 as director)
19 Apr
PAYE payment deadline (monthly or quarterly)

Companies House late filing penalties:

  • Up to 1 month late: £150
  • 1–3 months late: £375
  • 3–6 months late: £750
  • Over 6 months late: £1,500

7. Personal Tax Return (SA100) as Director

As a director, you must also file a personal Self Assessment tax return (SA100) each year, even if all your income comes from the company.

1
Declare your salary — From your P60 or payroll records
2
Declare dividends — All dividends received from your company
3
Declare any benefits in kind — Company car, private medical insurance etc.
4
Pay any personal Income Tax owed — Deadline: 31 January after the tax year end

8. Making Tax Digital for LTDs

Making Tax Digital (MTD) for VAT already applies if you are VAT-registered — you must use HMRC-compatible software to file. MTD for Corporation Tax is not yet mandatory but is being consulted on.

MTD for VAT (NOW mandatory)

All VAT-registered businesses must file via MTD-compatible software. Paper returns no longer accepted.

MTD for Corporation Tax (Pilot)

Voluntary pilot currently underway. Mandatory date not yet confirmed — check gov.uk for updates.

💡 Use accounting software like Xero, QuickBooks or FreeAgent to stay MTD-compliant and make year-end filing much easier.

Ready to track your company finances?

UK Tax Tracker helps director-shareholders record income and expenses so your year end is straightforward.

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