What It Actually Costs to Run a Limited Company in the UK

Running a limited company in the UK costs more than most people expect. You'll hear about corporation tax at 19 percent, and that matters. But there's an entire system of fees, charges and statutory obligations that quietly drain your profit margin every year.

Let's be honest. If you run a furniture retail business or any other venture as a limited company, you need to know exactly what you're paying for. Some costs are fixed. Some creep up unexpectedly. And some are simply unavoidable.

Corporation Tax Isn't Your Only Tax Bill

Corporation tax sits at 19 percent on profits above the small profits rate threshold of £50,000. For many furniture dealers and retail operations, that's straightforward enough. But it's just the beginning.

You'll also pay employer's National Insurance contributions if you have staff. Even if you run lean, that's typically 15 percent on earnings above £9,100 per employee. Then there's your own income through salary and dividends, both of which trigger tax at different rates.

If you take a salary of £12,570 (the personal allowance), you avoid income tax but still pay National Insurance at 8 percent on anything between £12,570 and £50,270. Take dividends above £500, and you're taxed at 8.75 percent on basic rate, 33.75 percent on higher rate.

A furniture business turning over £200,000 with reasonable profit margins could easily face £8,000-£12,000 in combined tax before any accountancy costs.

Accountancy and Professional Fees

You cannot do your own accounts if you run a limited company. Companies House demands statutory accounts. The Financial Conduct Authority requires audit thresholds to be met. HMRC expects proper record-keeping and tax returns.

A basic accountancy service costs between £1,200 and £3,500 per year for small limited companies. If your turnover exceeds £90,000, you may need a statutory audit. That's another £2,000-£5,000 depending on complexity. Furniture retailers with inventory and multiple locations often fall into this bracket.

If you need payroll management for staff, add £500-£1,500 annually. VAT accounting? Another £300-£800. Some accountants include these services. Others bill separately.

Cheap accountancy exists, but so do missed deductions, missed tax planning opportunities and penalties from HMRC. For a £150,000 turnover business, a £2,500 accountancy fee represents 1.6 percent of revenue. That's usually worth paying.

Statutory Compliance and Filing Costs

Companies House charges you to exist. Filing your statutory accounts costs £13 (online) or £40 (by post) each year. File late and you'll pay penalties.

Annual accounts must be filed within nine months of your financial year end. Confirmation statements must be filed every 12 months. If your company has a PAYE scheme, you must file a Full Payment Submission to HMRC every month or quarter. Miss the deadline and penalties start at £100, scaling upwards.

Directors also have a legal responsibility to keep proper accounting records for six years. Outsourcing this costs money. Doing it badly costs more.

For a furniture business with multiple locations or staff, directors' insurance is sensible. That's £300-£800 per year to protect personal assets against personal liability claims.

Payroll and Staff Costs Hidden in the System

Employ someone in your furniture showroom and you're obliged to offer a pension. Automatic enrolment means you contribute at least 3 percent of qualifying earnings. For an employee earning £20,000, that's £600 per year before their contribution.

You'll also pay Statutory Sick Pay, holiday pay and potentially redundancy costs. Employment law is strict. Breaking it is expensive. Many furniture retailers now factor in £200-£300 per employee annually just for pension auto-enrolment.

Software, Insurance and Miscellaneous Costs

You need accounting software. That's £10-£50 monthly. Payroll software adds another £15-£30. VAT compliance software, if you're VAT registered, might cost £20-£100 monthly depending on functionality.

Business insurance varies wildly. Public liability, product liability, stock protection, directors' and officers' insurance, cyber liability - a small furniture company might spend £1,500-£3,500 annually on a decent insurance package.

Bank charges have largely disappeared, but some banks still charge for business accounts. If you process card payments, you'll pay 1.5-2.5 percent per transaction. For a furniture retailer accepting cards regularly, that's significant.

Working Capital and Hidden Costs

Limited companies cannot distribute all profit to owners. You need reserves for tax bills, payroll fluctuations and unexpected costs. Many small company owners find they retain 10-20 percent of profit simply to maintain financial stability.

A furniture business with seasonal trading patterns needs even larger reserves. January and February are slow. You still need to pay staff and rent. The money you keep in the company earns nothing, yet it's essential.

The Real Picture

Let's work through an example. A furniture retailer with £300,000 turnover and £60,000 profit might face:

• Corporation tax: £11,400
• Accountancy and audit: £3,500
• PAYE and payroll admin: £1,200
• Software and systems: £800
• Insurance: £2,000
• Miscellaneous compliance: £500

That's £19,400 in compliance and tax costs alone. Add in the salary you take (which reduces profit), and your actual cost of being a limited company can easily exceed 30 percent of profit.

This isn't a reason to avoid limited company status. Limited liability is valuable. Tax efficiency through salary and dividend planning is real. But you need to budget for it properly.

Know your numbers. Pay for proper professional advice. Budget for compliance costs upfront. That's the only sensible way to run any limited company in the UK, whether you're selling furniture or anything else.