What a limited company is, how to register it with Companies House, and the corporation tax, dividend tax and filing rules you need — updated for 2026/27.
A limited company is a business that is a separate legal entity from the people who own and run it. It is owned by shareholders, run by directors (often the same people), and registered at Companies House. Because the company is separate, the owners have limited liability — their personal assets are generally protected if the business runs into debt. You set up a limited company by registering it with Companies House.
Incorporating brings limited liability, a more established image and, as profits grow, potential tax efficiency — in exchange for more admin and public filing. This guide explains what a limited company is, exactly how to set one up, what it costs, the corporation tax and dividend tax rules for 2026/27, and how to decide between a limited company and staying a sole trader.
A limited company (specifically a private company limited by shares, the most common form) has a few defining features:
You set up a limited company by registering (incorporating) it with Companies House. Choose a name, appoint at least one director, decide the shareholders and shares, pick a SIC code and a UK registered office, and file the memorandum and articles of association. Registering online costs £100 and is usually approved within 24 hours.
Here is how to set up a limited company, step by step:
Once incorporated you receive a Certificate of Incorporation and company number, and HMRC is notified so you can register for Corporation Tax (and VAT or PAYE if needed). For contractors specifically, see our limited company accounting service.
Running a limited company means a few fixed obligations. Since 1 February 2026 Companies House fees increased, so the current figures are:
Set-up: £100 online incorporation (up from £50). Every year: a confirmation statement (£50 digital, up from £34), annual accounts filed at Companies House, and a Corporation Tax return (CT600) filed with HMRC. If you take a salary, the company runs payroll under PAYE. Closing a company voluntarily (form DS01) is now cheaper at £13 digital.
Deadlines hang off your accounting reference date: accounts are usually due at Companies House 9 months after year-end, and Corporation Tax is payable 9 months and 1 day after year-end, with the CT600 due 12 months after year-end. Missing them triggers automatic penalties, which is why most directors use an accountant to keep the calendar under control.
A limited company is taxed differently from a sole trader. The company pays Corporation Tax on its profits; you then pay personal tax on what you draw as salary and dividends.
Corporation Tax (2026/27)
Dividend tax (2026/27) — directors typically take a small salary plus dividends. Dividend tax rates rose by 2 points from 6 April 2026:
A common structure is a salary at the personal allowance (£12,570) or the £5,000 secondary NI threshold, with the rest drawn as dividends. VAT works the same as for any business — registration is mandatory once taxable turnover exceeds £90,000. Rates stated are for 2026/27 and the optimal mix depends on your circumstances.
The two big advantages of a limited company are limited liability and control over when profits are taxed — you can leave profit in the company and draw it in a later year. Historically it was also clearly more tax-efficient than a sole trader once profits grew.
That gap has narrowed. From 6 April 2026 the dividend tax rise and higher employer National Insurance mean that, for a sole director drawing all profits immediately, the limited company advantage on take-home pay is smaller — and at some profit levels a sole trader can now be better off unless the company employs other people (and so can claim the Employment Allowance). It is genuinely a modelling question. Our detailed comparison runs the numbers: Sole trader vs limited company →
What is a limited company?
A limited company is a business that is a separate legal entity from its owners, owned by shareholders and run by directors, and registered at Companies House. The owners have limited liability, so their personal assets are generally protected if the company owes money.
How do I set up a limited company?
Register it with Companies House: choose a unique name, appoint a director, decide the shareholders and shares, pick a SIC code and UK registered office, and file the memorandum and articles. Most people register online for £100, with identity verification now required under the ECCT Act.
How much does it cost to set up a limited company?
Registering online directly with Companies House costs £100 from 1 February 2026 (up from £50). The annual confirmation statement costs £50 to file digitally.
What tax does a limited company pay in 2026/27?
Corporation Tax at 19% up to £50,000, 25% above £250,000, with marginal relief in between (effective rate up to about 26.5%). Directors taking dividends pay 10.75% / 35.75% / 39.35% for 2026/27 above the £500 dividend allowance.
Should I set up a limited company or stay a sole trader?
A limited company gives limited liability and control over when profits are taxed. But the April 2026 dividend and employer NI changes have narrowed the immediate take-home advantage for a sole director, so it depends on your figures — AccTek models both.
AccTek handles incorporation, Corporation Tax, payroll, VAT and your annual accounts — and models salary vs dividends so you keep more. Fixed monthly fees from £19.99.
This guide is for general informational purposes only and does not constitute tax or legal advice. Tax rules and Companies House fees change and individual circumstances vary — please consult AccTek or a qualified adviser before acting. Rates, thresholds and fees stated are for the 2026/27 tax year and Companies House fees in force from 1 February 2026.
Official guidance
For the Government’s official steps, see Set up a limited company (GOV.UK) and Register your company. AccTek Ltd is an independent accountancy firm and is not affiliated with HMRC or GOV.UK.
AccTek is a member firm of the Institute of Certified Practising Accountants (ICPA). Our accountants have a wide range of qualifications and accreditations from trusted professional bodies such as the AAT, ICPA, and ACCA.
