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Taking Money from your Limited Company

Tue, 24 Mar 2026 10:49:39 GMT

New HMRC Consultation puts the Director's Loan Account into Focus

A proposal to introduce a legal requirement on businesses to report transactions between close companies and their participators to HM Revenue and Customs has just been announced.

https://www.gov.uk/government/consultations/reporting-company-payments-to-participators/reporting-company-payments-to-participators-modernising-the-reporting-framework

Close companies are those controlled by five or fewer participators, or by any number of participators who are directors and a participator is a person with a share or interest in the capital or income of a company; usually they are the shareholders.

At the very least, the proposal when enforced, will mean closer controls on how money is transferred to directors and shareholders from their limited company, specifically via their director's loan account (DLA), although transfer of assets and other transfers of value are being included.

In short, what does an owner/director need to do?

If you are a contractor or director of a close company using the low‑salary plus dividends model, and making regular drawings in lieu of a dividend (a share of the company profits after corporation tax is calculated) now is a good time to:

Review how you actually take money out of the company (salary, dividends, expenses, “drawings”) and check that it matches what your accounts and tax returns say.
Tighten up your records: keep a clear, up‑to‑date Director’s Loan Account, minute dividend declarations properly, and retain supporting accounts (e.g. retain a Profit & Loss report as at end of month before the drawing to be treated as a dividend) to show there were sufficient profits in the company.
Separate personal spending and company spending, so that it is always clear whether a payment is salary, a dividend, a loan, a reimbursed expense or a personal expense. Personal spending should be booked to a separate personal expenditure account, not the DLA.
Move away from “we’ll sort it at year‑end” and get into the habit of updating DLAs and dividend paperwork in real time or at least monthly if drawings in lieu of dividends are taken out monthly.
Speak to your accountant or tax adviser about whether your current strategy and record‑keeping would stand up to closer HMRC scrutiny under the proposed reporting regime.

You do not need to change everything overnight, but you do need to assume that HMRC will soon expect better, more regular information on how you pay yourself and so do plan accordingly.

Get to Know your Personal Tax Account

Tue, 10 Feb 2026 14:16:20 GMT

Get a step by step guide to your Personal Tax Account

Take Control of your Taxes

Taxpayers should not assume that your code and your tax are automatically correct. It has been reported that HMRC is holding on to £billions in taxes that are overpaid by people who don't know or understand how to calculate their own taxes.

The solution is to use your Personal Tax Account to take control of your taxes, because HMRC isn't there to do it, it is now just a collector, the rest is up to you, if you don't engage a tax advisor.

It's good news is that HMRC has given every individual taxpayer a powerful free tool to keep an eye on their tax – the Personal Tax Account, but that means it has wiped it's hands of making sure your taxes are correct...the message is, it is up to you.....

Through your Personal Tax Account, you can:

Check your current Income Tax estimate and tax code.

Amend your tax code to refund overpaid tax in the current tax year

See how much tax you've paid and your income from work for the last 5 years.

Claim a tax refund if you think you've overpaid.

View and manage your Self Assessment (if you're registered).

Check your State Pension forecast and National Insurance history.

You access it by signing in using your Government Gateway details, or by creating them if you've never had them before. When you sign in, HMRC may ask you to prove your identity using photo ID such as a passport or driving licence – this is to keep your data secure, and here is the crucial mindset shift: your Government Gateway ID is as important as your online banking login. It should be:

Written down somewhere safe, or stored securely in a password manager.
Kept up to date (email and mobile number particularly).
Used regularly enough that you stay familiar with the system.

Summary

If you only log in once a year and forget your ID, the hassle of recovering access can put you off checking what's going on. That is exactly how overpayments and underpayments are allowed to carry on in the background for years. So I've been recommending for a long time that every UK taxpayer should;

Set up their Personal Tax Account (if they haven't already).
Log in at least a couple of times a year – for example, after the tax year ends in April, and again in the autumn.
Check that their tax code, income figures and benefits in kind look sensible.
Use the refund process or contact HMRC if something doesn't look right.

Download a Step by Step Guide here

Is HMRC Holding on to Your Cash?

Fri, 06 Feb 2026 17:39:58 GMT

HMRC is Sitting on Billions of UK Taxpayer Money

Are You One of the Millions Quietly Overpaying Tax to HMRC?

Every year in the UK, millions of ordinary workers, employees and pensioners pay the wrong amount of tax, often without realising it for years. Recent analyses suggest that taxpayers have overpaid billions of pounds in Income Tax through mistakes in tax codes and PAYE calculations.

Behind those big numbers are real people on PAYE who simply trust that "HMRC must have got it right" – until a letter, or a surprise tax refund, proves otherwise.

HMRC's own guidance confirms that if you've paid too much or too little by the end of the tax year, it has to issue a tax calculation – either a P800 or a "Simple Assessment" – to tell you about refunds or underpayments. These calculations are usually issued between June and the following March and mainly go to people who are employed or receiving a pension, not to everyone. If you are in Self Assessment, there is no P800 at all – HMRC just adjusts your bill within the online system. So it is perfectly possible for a PAYE taxpayer to be on the wrong code, pay too much tax for years, and only discover it much later.

How do these overpayments happen?

HMRC lists a number of common triggers for a "tax calculation" letter, and they are all very ordinary life events.

- You were put on the wrong tax code because HMRC had incomplete or outdated information about your income.

- You changed jobs, or had two jobs at once, and were paid by both in the same month.

- You started receiving a workplace or private pension.

- You received certain state benefits such as Jobseeker's Allowance or Employment and Support Allowance.

- You recently moved from self-employment to employment.

Individually, none of these feels like a tax problem – they're just normal changes in work or retirement. But the PAYE system depends on HMRC holding the right information at the right time, and if your code is wrong, your employer or pension provider simply follows that wrong code. Month after month, the wrong amount of tax is taken from your pay, and you may be none the wiser.

Multiply that across millions of taxpayers and it's easy to see how over £3 billion of over(and under)payments can build up quietly in the background in a single tax year. Some of those overpayments are eventually refunded, but a significant amount may never be reclaimed because taxpayers don't check or don't understand that they can challenge what HMRC's systems have produced.

The quiet shift to "digital by default"

There's another trend that makes this more worrying: HMRC's rapid move to digital communication. Over the last few years, more and more services have moved online, and the Personal Tax Account is now the main route for individuals to see their records and messages. Once someone has signed in online even once, HMRC can treat that as a signal that they can be contacted electronically – through the secure message inbox in their Personal Tax Account, not necessarily by post.

The problem is many any people:

- Sign in once because they were prompted or needed a one‑off form.

- Don't really understand what the Personal Tax Account can do.

- Forget their Government Gateway user ID and password by the time they need it again.

So HMRC may send an electronic message about a tax code change or a calculation, but the taxpayer never sees it, because they rarely (or never) log back in. If they've effectively gone "paperless" without realising, they might not get a physical P800 through the post at all, even where there's an over‑ or under‑payment.

This gap between HMRC's digital expectations and taxpayers' actual habits is one of the reasons I've been urging people for years – in my professional articles and on LinkedIn – to treat their Personal Tax Account like online banking. In earlier pieces aimed at agency workers and umbrella employees, I've consistently advised readers to use their Personal Tax Account to check income and tax, rather than assuming HMRC always gets it right.

I recently commented on an article aimed at contractors and umbrella workers, warning that HMRC could be charging billions too much tax through coding and assessment errors. You can read that article here:

https://www.contractoruk.com/news/contractors-warned-over-hmrc-charging-ps35-billion-too-much

The figures focus on contractors and off‑payroll workers, but the underlying message applies to anyone paid under PAYE: Please do not assume that your code and your tax are automatically correct. Get control of your Personal Tax Account and take control of how much tax you pay.

Follow this link to access your Personal Tax Account... https://www.gov.uk/personal-tax-account

MTD - The Real Cost

Sat, 17 Jan 2026 10:51:10 GMT

A combined digital platform plus accounting support for just £10 per week.....

Making Tax Digital: The Real Monthly Cost

If you’re a small business owner in the UK, Making Tax Digital (MTD) means you need digital records and timely digital submissions. That can create two separate costs you should plan for — the accounting software subscription and the managed bookkeeping/accountancy service. Here’s the clear breakdown so you can budget with confidence.

Xero (software): £16 per month + VAT — this is the platform for digital records
Oblako (accounting support service): £20 per month + VAT — checking quarterly MTD returns and one annual self-assessment tax return.

If you choose both, the combined monthly cost before VAT is £36 per month, giving you the software and the accounting support required to meet MTD obligations.

What you get;

Xero (£16 + VAT): digital accounting platform, file MTD returns, bank feeds, invoicing, cash flow reports and records storage.
Oblako (£20 + VAT): dedicated bookkeeping service. We make sure that your books are MTD-ready, file quarterly MTD returns on your behalf, and include one annual self-assessment tax return.

Why this package is a good deal?

Predictable, fixed monthly cost: £16 + VAT (software) + £20 + VAT (service) = £36 + VAT per month — easy to budget.
Peace of mind: filings done on time and correctly, freeing you to run the business.
Avoid paying variable accountancy fees for routine bookkeeping and MTD returns which can be far more when those tasks are billed hourly or per-return.

Quick cost comparison;

DIY with software only: £16 + VAT/month — but you still need to find time to prepare your own books and submit returns
Traditional accountant packages: often £50–£200+/month depending on complexity — for similar bookkeeping + filing services.

Who this is best for?

Micro and small businesses that need full MTD compliance without variable accountancy bills
Business owners who prefer to outsource bookkeeping and filing to experts
Business owners who want a fixed monthly cost

So, what is the true cost of managing MTD?

The cost of a combined digital accounting platform with accounting support is just £10 per week. If that sounds interesting and is within your budget, why not get in touch for a quick demo? We look forward to hearing from you.

#MakingTaxDigital #MTD #SmallBusiness #Bookkeeping #Xero #Oblako #Accounting

Five Big Things to Know about MTD and CIS

Thu, 27 Nov 2025 16:17:36 GMT

How are the New MTD Rules Going to Affect CIS Subcontractors?

This is a summary of what you will learn about MTD and CIS

You will need to register and buy a compatible software subscription.
You will use an app (iPhone or Android) to send invoices, log receipts for purchases etc.
Your banking transactions will upload automatically into your app.
Your CIS will be automatically accounted for within the app.
You will spend a few hours per month logging invoices and receipts, but less time at the end of the year when your personal tax return is due, this is because all the figures will be at hand.

Timelines

MTD requirements starts;
6th April 2026 for people earning over £50,000 per year }
6th April 2027 for people earning over £50,000 per year } from self-employment or property, or self-employment and property.
6th April 2028 for people earning over £50,000 per year }

Essentials that you need to know

You need to register your UTR with HMRC to submit returns under MTD before your due date.
You need to subscribe to one of the many MTD compatible accounting softwares that are available.
All compatible software comes in app form so you can manage MTD from your phone.
Choose software that has been recommended by someone you trust.
Using the software, your banking transactions will upload automatically and will recommend how to record each income or spend.
You’ll enter use your email address to log in, and you will send your invoices from a template provided with the software by email.
You will enter your UTR and the system will automatically account for CIS deductions depending on whether you have Gross Payment Status or the standard 20%.
When you receive a payment, the system will treat an invoice as paid and record the CIS deduction suffered as an asset, which means amounts that are owed to you by HMRC.
You must upload pdfs of the invoices you receive (if they are sent by email to you) otherwise a scanned image will do. Attaching a photo of your receipts taken from your phone is also possible..
You attach a proof of purchase to the payment in your banking transactions by clicking on it in the app. This is essential; too many missing receipts will cause issues with HMRC.

Submitting returns under MTD

You will need to submit a report to HMRC four times a year and these are compiled automatically within the app. You have a chance to check each one before submitting it. The app will prompt you to do this in good time.

You will need to submit your annual personal tax return to HMRC as usual, this requirement doesn’t change.

HMRC states that MTD will speed up tax rebates at the end of the year as MTD should make it much easier for HMRC to process CIS deductions- in theory.

Cost

You can manage MTD:- a, yourself, b, with someone checking the submissions to HMRC before you send them, or c, you can hand it over to an accountant.

For DIY MTD management it’s free, for a quarterly 'health-check' service before you submit a return, it’s £120 per year (£30 per quarterly report).

Accountants will charge between £300 and £500 per year. Book-keepers charge about £250 per year.

Your time is a cost factor but after the initial set up it should take less than an hour a week to complete necessary tasks, and then no time at all at the end of each year, because you will have all the figures/receipts for your annual personal tax return to hand.

Software

There are free apps that come with certain bank accounts, Mettle is one of them, but they are scaled down versions of a standard accounting package and may not suit everyone.

For £7 per month plus VAT you can subscribe to a simple version of a standard accounting package like Xero, which is missing no functionality. (There is no need for anything more expensive than this, because the full versions are designed for VAT registered businesses, or businesses that employ people and you won’t need any of these extra functionalities.)

CIS Payroll companies may provide access to some kind of a service, but in my opinion it is better to manage MTD/CIS independently.

Why not take a look at my other blog posts, they may not be specific to the construction industry, but they explain MTD in more detail.

Any questions??? Contact me the usual way or using this contact button -

Why is HMRC Pushing Small Business to go Digital?

Mon, 24 Nov 2025 14:56:52 GMT

What's behind the biggest overhaul in the UK tax system?

Why Is HMRC making most small business taxpayers adopt digital accounting?

Looking at it from HMRC's point of view, it makes sense, The UK tax gap for 2023–24 is estimated at £46.8 billion , which represents 5.3% of the tax that should theoretically be collected . That’s a huge shortfall—and HMRC’s latest data shows that small businesses account for around 60% of this gap , or roughly £28 billion .

Most of this gap comes from Corporation Tax, VAT, and self-employment business taxes . To put it in perspective, small company Corporation Tax alone makes up £14.7 billion , about half of the small business tax gap. The remainder is mainly split between VAT losses and undeclared or under-declared income from self-employment and property.

What’s Driving the Tax Gap?

HMRC breaks the tax gap down by behaviour, and small business non-compliance dominates several categories:

Failure to take reasonable care : About 31% of the overall gap , often due to poor record-keeping and filing mistakes.
Error : Around 15% , again concentrated among businesses with weak systems or limited understanding.

Combined, these two causes account for 46% of the gap , far outweighing deliberate tax evasion—which HMRC tackles through separate measures.

Why Digital?

To close this gap, HMRC is extending Making Tax Digital (MTD) as it increases compliance by reducinig errors and providing real time tax information. HMRC is dead against people who don't ring fence tax money leaving them unable to pay their tax liabilities. Digitalisation enables taxpayers to take more control of their company finances, and allows HMRC to track exactly what they are doing through AI and other digital programmes.

For small companies, expect more targeted “nudge” messages when digital records, VAT returns, or Corporation Tax filings look inconsistent with sector norms or digital returns are lacking sufficient links to the company's receipts and invoices - A pdf or jpeg is a digital document, and is all it takes to keep accounts 'looking good' to HMRC.

How should small businesses prepare

Strong digital systems will be your best defence against enquiries and penalties. Here’s what to focus on:

Maintain accurate digital records and reconcile VAT and bank data.
Document VAT and payroll controls .
Keep clear evidence for expense and relief claims .

For incorporated or limited companies, review these areas before year-end:

Contractor relationships
Director loan accounts
Benefits and dividends

These steps will help ensure your Corporation Tax and PAYE positions stand up to the more intensive compliance activity expected from 2026/27 .

Why is HMRC pushing nearly all Small Business to go Digital??

Mon, 24 Nov 2025 14:51:44 GMT

Here is what is causing one of the biggest tax overhauls...

Why Is HMRC making most small business taxpayers adopt digital accounting?

What’s Driving the Tax Gap?

HMRC breaks the tax gap down by behaviour, and small business non-compliance dominates several categories:

Failure to take reasonable care : About 31% of the overall gap , often due to poor record-keeping and filing mistakes.
Error : Around 15% , again concentrated among businesses with weak systems or limited understanding.

Combined, these two causes account for 46% of the gap , far outweighing deliberate tax evasion—which HMRC tackles through separate measures.

Why Digital?

How should small businesses prepare

Strong digital systems will be your best defence against enquiries and penalties. Here’s what to focus on:

Maintain accurate digital records and reconcile VAT and bank data.
Document VAT and payroll controls .
Keep clear evidence for expense and relief claims .

For incorporated or limited companies, review these areas before year-end:

Contractor relationships
Director loan accounts
Benefits and dividends

These steps will help ensure your Corporation Tax and PAYE positions stand up to the more intensive compliance activity expected from 2026/27 .

Nine Things a Small Business Owners Needs to Know

Sun, 23 Nov 2025 14:32:32 GMT

9 Questions a Small Business Owner should ask about their Balance Sheet

9 Essential Balance Sheet Questions Every Small Business Owner Should Ask

Why Your Balance Sheet Matters

Your balance sheet isn’t just a compliance document—it’s a snapshot of your company’s financial health. For small business owners, understanding it can reveal risks, opportunities, and strategies for growth. But where do you start? By asking the right questions.

1. What do my total assets and liabilities say about my company’s net worth and overall financial stability?

Your assets and liabilities determine your business’s value. Understanding this helps you assess whether you’re building wealth or accumulating risk.

2. How has my equity changed over time, and what does that mean for the business?

Equity reflects ownership value. Tracking changes can show if your business is growing sustainably or facing challenges.

3. Are there any notable trends when comparing current balance sheets with previous periods?

Spotting patterns—like rising debt or shrinking cash reserves—can help you act before problems escalate.

4. How does my liquidity look—do I have enough current assets to meet short-term obligations?

Liquidity is vital for smooth operations. Ask if your current assets cover upcoming bills and expenses.

5. What is the current ratio (current assets ÷ current liabilities), and is it healthy for my industry?

This ratio measures your ability to pay short-term obligations. Your accountant can compare it to industry benchmarks.

6. Are any accounts receivable or accounts payable long overdue, and what risks do those pose?

Late payments can strain cash flow and damage supplier relationships. Address these early.

7. What steps can improve liquidity or reduce financial risk based on this balance sheet?

Your accountant can suggest strategies like renegotiating payment terms or cutting unnecessary costs

8. How does this balance sheet compare to industry benchmarks or competitors?

Benchmarking helps you identify strengths and weaknesses relative to others in your sector.

9. Which numbers on the balance sheet are most critical, and are there warning signs?

Not all figures matter equally. Your accountant can highlight the metrics that impact your business most.

Turn Your Balance Sheet Into a Growth Tool

Asking these questions transforms your balance sheet from a static report into a strategic resource. It’s not just about where you are today—it’s about planning for tomorrow.

Three Steps to Company Director ID Verification

Sun, 23 Nov 2025 12:33:11 GMT

Read our earlier Blog - Company Director ID Verification or simply follow these three steps

Company Directors

The 18th November 2025 marks the start of a transition period. You will need to complete steps 1,2 and 3 before you can file subsequent documents at Companies House. Don't leave it too late because you risk a fine if you (or your accountant) fail to file returns and statements in the coming year.

Don't be concerned - it really is a simple process and you need a verified government account for dealing with various other government departments.

The three steps to verifying your identity to meet new Companies House requirements are....

1. Go to https://www.gov.uk/guidance/verify-your-identity-for-companies-house

2. Set up Gov One Account and verify your identity as the company director, when complete, go to manage account and keep note of your personal code

3. Go to https://www.gov.uk/guidance/provide-psc-verification to verify your identity as the Person with Significant Control and take note of the window in which you need to complete this step

Tip: You will find your personal code under Manage Accounts

Top Ten Accounting Terms

Fri, 21 Nov 2025 10:43:54 GMT

10 Key Accounting Terms

Understanding the key accounting terms will help you to get the most out of your accounting process and to figure out the best way to reconcile your transactions (analyse and record payments from the bank statement to your accounts).

10 Key Accounting Terms

Debit: Represents an increase in asset and expense accounts, or a decrease in liability, equity, and revenue accounts..
Credit: Represents an increase in liability, equity and revenue accounts, or a decrease in asset and expense accounts.
Assets: Resources with a monetary value that a company owns, such as cash, accounts receivable, and property.
Depreciation: The reduction in value of an asset over the period of its useful life
Liabilities: Amounts that a business owes to others, including accounts payable, loans, and wages.
Equity: The value of a company left over after all liabilities are subtracted from all assets.
Revenue: The total amount of income generated from a business's operations.
Expenses: The costs a business incurs to generate revenue.
Balance Sheet: A financial statement that shows a company's assets, liabilities, and equity at a specific point in time.
Profit and Loss Report : A statement that summarises income and lists expenditure, then calculates the profit or loss over a specific period.

Company Director ID Verification

Fri, 21 Nov 2025 10:20:21 GMT

Step by Step Guide to ID Verification

Company directors and Persons with Significant Control (PSCs) must verify their identity before the next annual confirmation statement after 18 Nov 2025.

The director(s) should verify first and then the Person with Significant Control has a window of 14 days in which to verify and that applies where director and PSC are the same person.

Here is a simple step by step guide;

✅ 1. Understand Who Needs to Verify

You must verify your identity if you are:

A company director (including overseas directors of UK companies)
A Person with Significant Control (PSC) (owns or controls >25% of shares or voting rights)
A company secretary
An Authorised Corporate Service Provider (ACSP) filing on behalf of others
Anyone who files information for a company (e.g., managing officers)

✅ 2. Prepare Before You Start

Gather:

Photo ID : UK passport, UK driving licence, or other accepted government-issued ID
Proof of address (sometimes required): utility bill or bank statement
Personal details : email address, home address, date of birth
A mobile phone and computer/laptop for the process

✅ 3. Choose How to Verify

There are three official methods :

Online via GOV.UK One Login (recommended, free)
Using the GOV.UK One Login app (scan passport chip and upload ID)
In person at a participating Post Office (requires prior setup online)
Alternatively, you can use an Authorised Corporate Service Provider (ACSP) , such as an accountant or solicitor, but this may incur a fee

✅ 4. Steps for GOV.UK One Login Verification

Step 1: Go to Verify your Identity at Companies House
Step 2: Confirm you have an accepted photo ID
Step 3: Create a GOV.UK One Login account Enter your email → receive a 6-digit code → verify email
Step 4: Set a secure password
Step 5: Enable two-factor authentication (usually via SMS or app)
Step 6: Enter your personal details (name, DOB, address)
Step 7: Upload your ID documents or scan via the app
Step 8: Complete security checks and submit

✅ 5. After Verification

You’ll receive a Personal Unique Identifier Code (e.g., XY1-Z000-0000)
Keep this code safe—it links your verified identity to your company roles
Share it with your accountant or agent if they file on your behalf

✅ 6. Deadlines & Compliance

New directors/Person with Significant Control (PSC) : Verify within 14 days of appointment
Existing directors/PSCs : verify before your next annual confirmation statement after 18 Nov 2025, directors should verify first and then the PSC has a window of 14 days in which to verify (where director and PSC are the same person the same rules apply) Go to.. https://www.gov.uk/guidance/provide-psc-verification
Failure to verify can lead to penalties, filing restrictions, or disqualification