What are the costs of running a limited company?

There are several 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 £100 if using the digital service), 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.

An accountant may charge a one-off fee or provide the service for free if you sign up as a new client.

Find out more in our limited company – costs and options article.

The Companies House formation fee and professional costs directly associated with setting up the company are normally treated as capital costs and therefore cannot be offset against the new company’s Corporation Tax profits.

However, this doesn’t mean that all costs you incur before the company starts trading are disallowed. Some pre-trading expenses can be claimed by the company once it starts trading, subject to the normal rules.

Accountancy fees

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 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 monthly or annually.

Based on our experience working with small, limited companies over many years, a typical specialist accountant will charge an annual fee of between £1,200 and £1,800, although costs vary widely.

Take a look at this limited company accountancy fees table for some examples.

Remember that completing your Self Assessment tax return is a personal expense and cannot normally be reclaimed from the company as a business expense. Some accountants will complete your personal tax return for free or include it within their overall package.

Read our limited company accountant guide to find out what you should expect.

Banking costs

As a limited company is a separate legal entity, you should keep the company’s money separate from your personal funds. In practice, this means opening a business bank account in the company’s name rather than using your everyday personal account for company transactions.

Until recently, you would typically have to pay a monthly ‘charge’ to one of the high street banks to have your banking needs looked after. These days, there are many free alternatives to traditional banks, 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.

Business insurance

Many companies have some kind of insurance in place – either because they are legally required to (employers’ liability if you employ people, subject to limited exemptions) or because it 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.

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.

Visit our limited company insurance guide to find out which types of business insurance may be compulsory and which are optional.

Confirmation Statement (£50)

Your company must file a Confirmation Statement with Companies House at least once every 12 months.

The statement confirms that the information Companies House holds about your company is correct, and allows certain information to be updated where necessary.

It costs £50 to submit your Confirmation Statement digitally, although many accountants absorb this cost into their annual fee. The paper submission fee is £110.

Find out more in our guide to the Confirmation Statement.

Companies House identity verification

Company directors and people with significant control (PSCs) are now subject to Companies House identity verification requirements.

For most people this is a one-off process. There is no charge if you verify directly using GOV.UK One Login, although an accountant, solicitor or other Authorised Corporate Service Provider may charge a fee if you ask them to verify your identity on your behalf.

Late filing can be expensive

Another potential cost is one that’s entirely avoidable – Companies House late filing penalties.

If a private limited company files its annual accounts late, the automatic penalty currently starts at £150 and increases according to how late the accounts are. The penalty can reach £1,500 where accounts are more than six months late, and penalties are doubled if accounts are filed late in two successive financial years.

There can also be penalties and other consequences for failing to file a Confirmation Statement, so make sure you know your company’s filing deadlines.

Other limited company running costs

This guide focuses on the main costs of running a company; however, you will also encounter numerous variable expenses as a company owner.

These might include software, equipment, telephone and broadband costs, professional subscriptions, travel, training and other costs associated with running your business.

Find out more in our guide to limited company expenses.

You should also remember that taxes such as Corporation Tax and VAT, where applicable, can have a significant effect on company cashflow, although they are taxes rather than running costs in the normal sense.