There are a number of initial and ongoing costs associated with running a limited company. In this guide we look at the typical costs you will incur as a company owner.
Company formation costs
If you decide to register a new company, you can either do this directly with Companies House (this costs a mere £12), or via an intermediary – a formations agent or an accountant.
The cost of using a formations agent varies significantly depending on the number of ‘add-ons’ you choose during the incorporation process. Our partner, Clever Formations, can set up a new company for just £10.95, for example.
An accountant may charge a one-off fee, or provide the service for ‘free’ if you’re signing up as a new client.
Find out more in our limited company – costs and options article.
It is worth noting that the cost of incorporating a company is a capital cost, so it cannot be offset against the new company’s Corporation Tax bill.
Unless you have accounting experience, and the time to do your company’s books yourself, you should always appoint a specialist accountant to look after your firm’s financial affairs.
You can either pay for accountancy fees on an ad-hoc basis, perhaps to complete specific tasks – such as the company’s annual accounts. Or engage an accountant to provide an all-inclusive service – payable on a monthly or annual basis.
From our experience of working with small limited companies for many years, a typical specialist accountant will charge an annual fee of somewhere between £1200 and £1800, although fees do vary widely.
Take a look at this limited company accountancy fees table for some examples.
Remember that the cost of completing your self assessment tax return is a personal expense, so cannot be reclaimed from the company. Some accountants will complete your personal tax return for free.
Read our limited company accountant guide to find out what you should expect.
You must set up a bank account for your limited company, as it is a legal entity in its own right, so you cannot use your personal account for business purposes.
Until recently, you would typically have to pay a monthly ‘charge’ to one of the high street banks for looking after your banking needs. These days, there are many free alternatives to the traditional banks, such as Tide, so the choice is yours.
Remember to look at the ‘real’ cost when comparing bank accounts. Is there a monthly fee after any ‘free’ period ends? If you’re using one of the newer banking alternatives, what are the transaction costs like?
Read our guide to choosing a business bank account.
Many companies have some kind of insurance in place – either because they have to legally (employers’ liability if you employ people), or if is a contractual requirement (e.g. professional indemnity for consultants).
And there are many reasons to take out cover to provide peace of mind – such as tax investigation insurance, or public liability cover (if you deal with members of the public).
Clearly, the associated costs vary according to your needs, however we have often found that you can save money by taking out a package of cover wherever possible.
Try Qdos as a good starting point. They are very competitively priced, and have a great reputation.
Visit our limited company insurance section for guides to the most commonly sought after business policies.
Confirmation Statement (£13)
At least once per year, your company should file a Confirmation Statement with Companies House. This provides a current snapshot of your company’s details – such as the company’s registered address, and directors’ details.
It costs £13 to submit your Confirmation Statement, although many accountants absorb this cost into their annual fee
Find our more in our guide to the Confirmation Statement and PSC register.
Other limited company running costs
This guide focuses on the unavoidable costs of running a company, however there are countless variable expenses you will also encounter as a company owner. Find out more in our guide to limited company expenses.
If you want to form a company right away, try Clever Formations.
Useful Services for Company Directors
- Pay for life insurance via your limited company - save up to 50%
- Form a new company online for just £10.95 with Clever Formations
- Free business bank account + £50 bonus cash! - visit Tide
- Professional Indemnity insurance from £13.50/month - visit Qdos