Running your contracting work through a limited company comes with real tax advantages, but it also brings a set of filing obligations that catch a lot of contractors off guard. This guide covers exactly what you need to do, what the common errors are, and what a personal accountant actually handles for you.

Why limited company accounting is not the same as being self-employed

When you operate as a sole trader, your accounting obligations are relatively contained: a Self Assessment tax return once a year and, if your turnover crosses the threshold, quarterly VAT returns. A limited company is a separate legal entity and carries a distinct set of annual duties that run on their own calendar, regardless of how busy your contracting work is.

Your company must file annual accounts with Companies House, submit a Corporation Tax return (CT600) to HMRC, run a payroll for any salary payments, and handle VAT if registered. On top of that, if you draw dividends, you will need a personal Self Assessment return too. Miss any of these and HMRC and Companies House both issue automatic penalties.

Where most contractor directors go wrong

Most errors are not deliberate. They happen because contractors are focused on delivering work for clients and assume they will deal with the admin later. Later tends to arrive with a penalty notice attached.

Treating the company bank account like a personal account

Drawing money from the company without recording whether it is salary, a dividend, or a director’s loan is one of the most common problems I see. An unplanned director’s loan that sits outstanding at your company’s year-end triggers a Section 455 tax charge (currently 33.75% of the outstanding balance), which HMRC will collect via your Corporation Tax bill. Keeping salary and dividend payments properly documented from day one avoids this entirely.

Ignoring IR35 until a contract is already signed

IR35 determines whether HMRC views you as a genuine contractor or a disguised employee. If your contract falls inside IR35, the tax treatment changes significantly and the financial difference can be substantial. Since the 2021 off-payroll working reforms, for medium and large private-sector clients it is the client who determines your IR35 status, not you. Getting a contract reviewed before you sign, rather than after, is far cheaper than disputing an HMRC determination retrospectively. According to Stewart Accounting’s 2026 contractor guide, IR35 compliance remains the single area where contractors face the largest unexpected tax bills.

What your limited company accounting actually involves, step by step

Below is what needs to happen across a typical contractor’s company year. This is not an exhaustive legal checklist, but it covers the core obligations that generate penalties when missed.

1. Register the company and set up a salary structure. Once your company is incorporated at Companies House, you need to register with HMRC as an employer (even if you are the only director taking a small salary), decide on a tax-efficient salary level for the year, and set up a payroll scheme. For most contractor directors, the salary sits around the National Insurance threshold to minimise both employee and employer NIC while still building a qualifying year for the State Pension.
2. Keep records and file quarterly VAT returns if VAT-registered. If your company’s taxable turnover exceeds the VAT registration threshold (currently £90,000), you must register for VAT and submit quarterly returns under Making Tax Digital (MTD) rules using compatible software. QuickBooks, FreeAgent and Xero all support MTD-compliant VAT filing. Keeping records current throughout the quarter means the return takes minutes rather than a weekend of reconstructing invoices.
3. File annual accounts, the CT600 and your personal Self Assessment. Your company accounts (profit and loss, balance sheet) go to Companies House within nine months of your company year-end. Your Corporation Tax return (CT600) goes to HMRC within twelve months of the year-end, though any tax owed is due nine months and one day after. If you drew dividends during the year, you also file a personal Self Assessment return by 31 January following the tax year. These three deadlines run on different clocks and missing one does not excuse the others.

This is the cycle that repeats every year. It is manageable with the right systems in place. The contractors who find it stressful are usually those who have let records slip and are trying to reconstruct twelve months of transactions in January.

What contractor accountants charge and what you actually get

According to IT Contracting’s 2026 fee comparison, monthly all-inclusive packages for UK contractor accountants range from around £70 to £150 plus VAT per month. That range typically includes company accounts, the CT600, Companies House filings, monthly payroll for one director, quarterly VAT returns, and tax planning on salary and dividends. Self Assessment for the director is sometimes included, sometimes charged separately. At a day rate of £350 to £500, the annual cost of an accountant is roughly three to five days of billing, and it covers a full year of compliance across multiple filing obligations.

How to get your limited company accounting sorted today

If your company is already trading, the first step is to establish where you currently stand: what has been filed, what is outstanding, and whether your bookkeeping records are current. If the company is newly incorporated, the setup decisions you make now (salary level, VAT registration, software) shape the rest of the year. Either way, it is quicker to get this assessed properly than to guess.

• Gather your company incorporation documents, your HMRC Corporation Tax reference (issued automatically after incorporation), and any bank statements since trading began. These are the three things any accountant will ask for first.
• Book a free introductory call with me to go through your current situation, your IR35 position if relevant, and what needs to happen before your next filing deadline. There is no charge for the call and no obligation to proceed.