As a director of a limited company, you must:
- follow the companyâs rules, shown in its articles of association
- keep company records and report changes
- file your accounts and your Company Tax Return
- tell other shareholders if you might personally benefit from a transaction the company makes
- pay Corporation Tax
You can hire other people to manage some of these things day-to-day (for example, an accountant) but youâre still legally responsible for your companyâs records, accounts and performance.
You may be fined, prosecuted or disqualified from being a company director if you do not meet your responsibilities.
Contact your professional adviser or trade association to find out more.
Taking money out of a limited company
How you take money out of the company depends on what itâs for and how much you take out.
Salary, expenses and benefits
If you want the company to pay you or anyone else a salary, expenses or benefits, you must register the company as an employer.
The company must take Income Tax and National Insurance contributions from your salary payments and pay these to HM Revenue and Customs (HMRC), along with employersâ National Insurance contributions.
If you or one of your employees make personal use of something that belongs to the business, you must report it as a benefit and pay any tax due.
Dividends
A dividend is a payment a company can make to shareholders if it has made a profit.
You cannot count dividends as business costs when you work out your Corporation Tax.
Your company must not pay out more in dividends than its available profits from current and previous financial years.
You must usually pay dividends to all shareholders.
To pay a dividend, you must:
- hold a directorsâ meeting to âdeclareâ the dividend
- keep minutes of the meeting, even if youâre the only director
Dividend paperwork
For each dividend payment the company makes, you must write up a dividend voucher showing the:
- date
- company name
- names of the shareholders being paid a dividend
- amount of the dividend
You must give a copy of the voucher to recipients of the dividend and keep a copy for your companyâs records.
Tax on dividends
Your company does not need to pay tax on dividend payments. But shareholders may have to pay Income Tax if theyâre over ÂŁ2,000.
Directorsâ loans
If you take more money out of a company than youâve put in – and itâs not salary or dividend – itâs called a âdirectorsâ loanâ.
If your company makes directorsâ loans, you must keep records of them. There are also some detailed tax rules about how directorsâ loans are handled.