Company Formation & Accounting for UK Businesses: A Simple Starter Guide

You have just formed a limited company, or you are about to, and your head is full of names, shares, and Companies House forms. It feels exciting. It can also feel like a lot.

Here is the bit many founders miss: company formation and accounting are joined at the hip. The choices you make in your first few weeks affect your tax bill, your cash flow, and how stressed you feel at your first year‑end.

This guide walks you through accounting for UK businesses from the moment you press submit at Companies House to your first set of accounts. It is written for you as a UK founder, not for accountants.

You will also see how a simple, all‑in‑one service like Figures can sit in the background and keep everything joined up, without any hard sell.

What company formation means for your accounting in the UK

When you move from being a sole trader to running a UK limited company, the numbers change shape.

Your company is now a separate legal person. You become a director and, usually, a shareholder too. The company earns the income, owns the assets, and pays the bills. You take money out as salary, dividends, or expenses, not as simple drawings.

That shift brings new rules: corporation tax, statutory accounts, and official filings at Companies House and HMRC. Get those right and you stay paid, safe, and in control.

Limited company vs sole trader: how your accounts change

Here is a quick side‑by‑side view.

As a sole trader you report profit through your self assessment return. The records can be simple, as long as they are accurate.

As a company you must keep formal accounts and file them at Companies House, then file a corporation tax return with HMRC. Good planning at formation, such as how many shares you issue and who holds them, can improve tax efficiency and cash flow for years.

Why accounting matters from day one, not at year‑end

Many founders ignore accounting until the first deadline letter lands. That is when panic starts.

From day one you should:

• get paid into a business bank account
• keep receipts for every cost
• record invoices and bills
• track any money you put into or take out of the company.

If you mix personal and business spending, forget to track VAT, or treat the company bank card like your own wallet, the clean‑up later is slow and expensive.

Simple systems from the start mean you avoid fines, stay on top of cash, and give your future self a much quieter year‑end.

Step-by-step: from UK company formation to your first set of accounts

Think of this section as your first‑year checklist.

You will go from incorporation at Companies House to banking, software, and tax registrations. Each step has an accounting impact, even if it looks like pure admin.

Setting up your UK limited company the right way

To form a private limited company you usually:

1. Choose a name and check it is allowed at Companies House.
2. Pick a SIC code that describes what you do.
3. Appoint at least one director and set up shareholders.
4. Set a registered office address in the UK.
5. File your application online or by post.

You can follow the official Companies House guide on setting up a limited company if you want to do this yourself.

As of November 2025, online incorporation costs £100, same‑day online (through software) is £156, and paper filing is £124. From 18 November 2025, you and other officers must pass identity checks when you set up or run a company.

Each step has an accounting angle:

• Share structure affects how you pay dividends later.
• SIC code shapes what looks like normal spending in your accounts.
• Registered office decides where official letters about deadlines and penalties go.

Get these details straight at the start and your future accounts tell a clean story.

Essential first-week tasks after incorporation

Once you have your Certificate of Incorporation, your first week should focus on foundations.

Key jobs:

• Open a dedicated business bank account so all income and costs flow through one place.
• Choose cloud accounting software and connect your bank feed.
• Set up a simple chart of accounts that matches your type of business.
• Decide your accounting reference date (your year‑end) or stick with the default.
• Save your incorporation documents, share certificates, and bank details somewhere safe.

These steps turn a legal company into a working business. They make it far easier for an accountant or a service like Figures to step in and run your books without a messy catch‑up.

Registering with HMRC for corporation tax, VAT and PAYE

Companies House does not tell HMRC that you have started trading. You must handle that part.

Key rules as of 2025:

• Corporation tax: register with HMRC within 3 months of starting to trade, even if you have not made a profit yet. See the HMRC page on corporation tax.
• VAT: you must register if your VAT‑taxable turnover goes over £90,000 in a rolling 12‑month period. The limit is explained in the guide on VAT registration thresholds. You can register earlier if it helps your cash flow or makes you look more established.
• PAYE: if you pay any salary, even to yourself as a director, you may need a PAYE scheme. HMRC explains this in PAYE for employers.

Late registration leads to penalties and messy backdated records. Many founders ask someone like Figures to handle all three registrations at once so nothing slips.

Key accounting rules every new UK company director should understand

You do not need to be a finance expert. You do need to know the basics of what to do, when, and what happens if you ignore it.

Your duties as a company director around money and records

As a director you must act in the best interests of the company, not just yourself.

In practice that means you:

• keep accurate records of all income, costs, assets, and debts
• keep receipts and invoices for at least 6 years
• approve and file annual accounts and a confirmation statement on time
• keep the company bank separate from your personal money
• watch cash so the company can pay its bills.

If you ignore these duties you can face fines, personal penalties, or even disqualification as a director. The company may be separate, but you are still on the hook for serious failures.

Corporation tax, VAT and other key taxes in simple terms

Here is how the main taxes fit together.

• Corporation tax: the company pays tax on its profits after allowable expenses. Allowable costs include laptops, software, travel for work, and a fair share of home office costs.
• VAT: if registered, you add VAT to most sales, then reclaim VAT on many costs. You pay HMRC the difference. VAT returns must be filed using software under Making Tax Digital.
• PAYE and National Insurance: the company runs payroll for salaries, reports each pay run to HMRC, and pays tax and NIC from wages.
• Dividend tax: shareholders pay personal tax on dividends, separate from their salary.

You do not have to know every rule. You do need a clean system so your accountant can apply the rules for you.

Common accounting mistakes new UK companies make and how to avoid them

You will see the same traps again and again:

• Forgetting to register for corporation tax within 3 months. Fix: add the date to your calendar on day one.
• Missing annual accounts or the confirmation statement. Fix: use software or a firm that tracks deadlines and files on your behalf.
• Mixing personal and business spend. Fix: use the company card only for company costs.
• Taking cash out with no records. Fix: record salary, dividends, or director loans each time.
• Getting VAT wrong, such as claiming on non‑business costs. Fix: keep receipts and ask before you claim.

A joined‑up service like Figures bakes these checks into your monthly process so you do not have to remember every detail.

Practical accounting systems that make running a UK business easier

Good accounting for UK businesses is mostly about habits and tools. You want simple routines that fit into a busy week, not a second job.

Simple weekly and monthly routines to stay on top of your books

Here is a light rhythm that works for most small companies.

Each week

• Reconcile your bank: match payments and receipts in your software.
• Log new invoices and bills.
• Check cash in and out, so nothing surprises you.

Each month

• Review a short profit and loss report.
• Put money aside for corporation tax and VAT in a separate savings account.
• Pay yourself, pay suppliers, and chase any late invoices.

If your bank feeds into cloud software or a service like Figures, most of this turns into a quick review, not hours of typing.

Choosing the right support: DIY software, local accountant or all-in-one service

You have three broad options.

• DIY with software: cheapest in cash terms, suits very small and simple businesses, and founders who enjoy numbers. You still carry the risk if you miss something.
• Local accountant: good if you want face‑to‑face meetings and ad‑hoc support. Fees can grow as you add VAT, payroll, or extra entities.
• All‑in‑one service like Figures: fixed monthly price that wraps bookkeeping, accounts, VAT, payroll, and tax returns into one package. Works well if you want clarity on costs and do not want to juggle different providers.

Pick the route that matches your budget, growth plans, and how hands‑on you want to be.

How Figures helps you go from company formation to confident growth

Figures is built for UK founders who want everything in one place.

On the company formation side it can help with set‑up details, a London registered office, and HMRC registrations for corporation tax, VAT, and PAYE. After that, it handles day‑to‑day bookkeeping, VAT returns, payroll, year‑end accounts, corporation tax, and your director self assessment.

Pricing is simple: Founder Mode at £100 per month for early‑stage companies, and Growth Mode at £180 per month, which adds quarterly VAT, monthly payroll, and a director self assessment. You get one point of contact, plain‑English answers, and clear reports so you always know where cash and tax stand.

If you want accounting for UK businesses without bouncing between different firms, this joined‑up approach can save a lot of time and stress.

Conclusion

If you treat accounting as part of company formation in the UK, not an extra job for later, you protect yourself, save tax, and gain peace of mind. You form the company correctly, set up clean systems, understand your director duties, and choose support that fits your stage.

From that point, your first year‑end becomes a tidy formality, not a fire drill.

If you would like a done‑for‑you route from sign‑up at Companies House to confident growth, you can explore the plans at Figures, book a quick call, or start a free trial. Your future self will thank you for sorting the numbers early.