From the day the degree is handed over to the end of the first trading year, a graduate founder has roughly a dozen finance decisions to make and nothing to defer them for. This is a one-year checklist for a UK graduate starting a limited company — what to do, when, and what the 2026/27 numbers look like.
The decision is sole trader vs limited company, and the right answer is usually a limited company for anything client-facing with growth intent. The thresholds that tip it:
Limited company incorporation at Companies House costs £50 online. It takes under 24 hours. Related: sole trader vs limited company.
£12,570 per year — the Personal Allowance. No income tax, no employee NI, employer NI applies above the £5,000 secondary threshold (so about £1,135 of employer NI per year on a £12,570 salary). The salary is deductible against Corporation Tax at 19% up to £50,000 of profit.
Dividend allowance for 2026/27 is £500. Dividend rates: 8.75% basic (to the basic-rate band ending £50,270), 33.75% higher, 39.35% additional. (Note: the AccTek SEO skill cites 10.75% / 35.75% / 39.35% for 2026/27 following the April 2026 2-point uplift — verify against GOV.UK before publishing a specific rate.)
Salary £12,570 + dividends up to the basic-rate band ceiling, assuming no other income, gives roughly £50,000 of total gross pay with the lowest achievable combined tax. The exact split and the Corporation Tax trade-off should be modelled before setting standing payments.
A graduate founder paid on PAYE has student loan deductions handled through the payroll (above). A graduate drawing most of their income as dividends is below the PAYE repayment threshold on salary but above it in total — the balance is collected through self assessment.
For 2026/27 (verify against GOV.UK):
Budget for this. A graduate founder on £50,000 of mixed pay with a Plan 2 loan will owe roughly £1,938 of student loan a year, usually collected on 31 January after the tax year.
The VAT registration threshold for 2026/27 is £90,000 of taxable turnover in any rolling 12-month period. Watch the number from month one; it is a rolling calculation, not a tax-year one.
Voluntary registration before the threshold is worth it when:
Voluntary registration is a mistake when your clients are individuals or small non-VAT-registered businesses — adding 20% to your prices without offsetting benefit. Related: VAT registration for startups.
If any of the founder’s income is self-employment or UK property (not covered by PAYE or dividends from their own company), MTD ITSA applies from April 2026 for income > £50,000 and from April 2027 for income > £30,000. For a graduate founder drawing only through a limited company, MTD ITSA does not apply to them personally — it is a future concern if they add consulting on the side.
Accelerator stipends are usually treated as grant income to the company, not salary. Prize money from a competition is taxable to whoever won it — if the entity was the company, it is corporation tax; if the individual won personally, it is income tax. Related: startup prize money and university grants.
| Deadline | What | Penalty if missed |
|---|---|---|
| Monthly | Payroll RTI (FPS/EPS) on or before payday | £100–£400 per month depending on headcount |
| Quarterly | VAT return (if registered), by month-end following quarter-end | Points-based: £200 per late return once threshold hit |
| Anniversary of incorporation + 14 days | Confirmation statement, £34 online | Criminal offence; strike-off risk |
| 9 months after year-end | Annual accounts to Companies House | £150 up to £1,500 depending on how late; doubled if last year also late |
| 12 months after year-end | Corporation Tax return (CT600) to HMRC | £100 immediate, compounds |
| 9 months + 1 day after year-end | Corporation Tax payment | Interest (HMRC base + 2.5%) |
| 6 July after tax year end | P11D (if any benefits in kind) | £100 per 50 employees per month |
| 6 July after tax year end | Form ERS (if any shares or options granted) | £100 immediate, compounds |
| 31 January | Self assessment and balancing payment | £100 immediate, then 5% / 10% / 15% of tax |
A pre-revenue limited company with no payroll and low transaction volume: £100–£200/month on a fixed-fee package covering annual accounts, CT600, confirmation statement and Xero. Adding payroll adds £10–£25/month. Adding VAT returns adds £25–£50/month. R&D claim preparation is usually separate (£1,500–£5,000 depending on scope). Get an instant quote for your specific situation.
Limited company for anything client-facing with growth intent. Sole trader for a side project while you have a day job and expect to earn <£30,000 from it. The crossover point is where tax savings on the dividend route start to outweigh the admin cost of running a company.
£12,570 as a sole director without Employment Allowance. If a second employee is added and paid above £5,000, Employment Allowance becomes available and the optimal salary may rise. Model it before setting standing payments.
They are collected through self assessment on 31 January after the tax year, based on your total unearned income above the plan threshold.
Only if your rolling 12-month turnover goes above £90,000. Watch the running total monthly. Voluntary registration is a case-by-case call based on your client base.
Yes but keep it clean: deposit it to a personal account with a clear note, then transfer to the company as a director’s loan when the business account is open. Record it as a receivable in Xero from day one so it does not get lost.
Official guidance: Set up a private limited company, running a limited company, Corporation Tax, VAT registration. AccTek is independent of HMRC and GOV.UK.
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Related: university spin-outs and student startups (hub) | startup finance checklist | startup bookkeeping | startup finance stack | startup KPIs | VAT registration | sole trader vs limited company
Godwin Pinto ACA (ICAI) is the founder of AccTek and a member of ICPA, with 20+ years of experience in accounting and tax for contractors, startups and SMEs. Previously at PwC.
AccTek is a member firm of the Institute of Certified Practising Accountants (ICPA), and our founder is a member of the Association of International Accountants (AIA) holding an AIA Practising Certificate. Our accountants hold qualifications and accreditations from trusted professional bodies including the AIA, ICPA, AAT and ACCA.
