What is a private limited company? Some key facts and figures

After the sole tradership, the limited company is the most popular trading structure in the UK. In this guide, we look at the key features of the private limited company – plus some interesting facts.

How many limited companies are there in the UK?

• According to Companies House, there are over 4.8 million companies on the register (March 2022). 96% of this number was made up of private limited companies.
• Interestingly, the majority of companies on the official register are not ‘actively trading’.
• The number of companies has increased significantly over time – with fewer than 1m companies registered in the late 1980s.
• Over 750,000 new companies were incorporated between 2021-2022. Over the same time period, almost 580,000 companies were dissolved.
• The average age of a company is 8.6 years.

What is a private limited company? Key Facts

Companies House

Companies House, the registrar of companies, oversees the incorporation and running of all limited companies in the UK. The Registrar holds details about every company in the UK – both active and dormant.

Limited liability

The liablity of a company’s directors is limited if things go wrong, unlike the sole trader business structure.

Distinct legal entity

A limited company is a distinct legal entity from its shareholders and directors. This is one of the reasons to set up a separate bank account for your company. If you are a sole trader, you and your business are one single legal entity.

Separate finances

The financial affairs of a limited company, and that of its directors is completely separate, unlike the sole trader route. This means that directors are not responsible for the company’s debts, unless they have been negligent.

Company annual accounts

Private limited companies submit their annual accounts each year to both Companies House and HMRC.

Tax on company profits

Limited companies pay Corporation Tax on their annual profits. The rates changed in 2023 – a starting rate of 19%, rising to 25% for larger companies.

Personal tax for company directors

Company directors fill in an annual self assessment form to work out their income tax liabilities for the previous tax year. This must be submitted (and any tax paid) by 31st January after the end of the previous tax year.

VAT registration

If the company’s turnover is greater than £85,000 over a 12 month period (2023/24 tax year), you must register the company for Value Added Tax

Comfirmation Statement – an annual requirement

All companies must provide Companies House with a Confirmation Statement each year. This is effectively a snapshot of your company affairs at a moment in time.

Director’s responsibilities

Company directors have a number of legal and financial responsibilities to attend to, and more administration to deal with than self employed people.

An accountant can help

Most limited company directors appoint an accountant to deal with their tax affairs, and to deal with HMRC and Companies House. A good accountant will save you time and money.

How many directors should a company have?

A limited company can be formed with just a sole director. Since the implementation of the Companies Act 2006, the company secretary is an optional appointment.

Incorporation provides a professional image

In some cases, having a limited company can provide a ‘professional’ appearance for your business. It may also be a mandatory requirement in some industries, or required by virtue of a contract.

Limited vs. PLC

Private limited companies cannot offer their shares for sale on the stockmarket – although public limited companies (PLCs) can.

Before you start

You can read more about the steps involved in the limited company incorporation process here, and also a good legal overview of all the main business structures.

• You can set up a company online via Companies House or a formations agent. The process is fairly straightforward, and costs from as little as £13.
• If you require some help with the incorporation process, find out about our long-term company formations partner, here.

When making the choice of business structure, you should always consult a professional, as each business has different needs.

There is no ‘right’ or ‘wrong’ business structure to use -it all depends on what you do, your financial situation, the industry you are in, and how large your operation is likely to become.