Author: PaperRocket

Starting a limited company is a big step. It’s exciting, but it also comes with responsibilities that can catch people out early on.

We see the same issues crop up with new directors, so here are five of the most common mistakes and how to avoid them.

1. Mixing Personal and Business Money

This is by far the biggest one.

Using your company card for personal spending might feel harmless at the time, but it quickly creates confusion. It also makes your bookkeeping messy and can lead to tax issues later on.

What to do instead:

Keep a separate business bank account
Only run company income and expenses through it
If you need money personally, take it properly as salary or dividends

A clean separation makes everything easier, from bookkeeping to year-end accounts.

2. Not Setting Money Aside for Tax

One of the biggest shocks for new company owners is their first tax bill.

Unlike employment, nothing is deducted automatically. Corporation tax, VAT (if registered), and personal tax all need planning for.

What to do instead:

Put aside a percentage of your income regularly
Keep an eye on your profits throughout the year
Don’t assume the cash in your account is all yours to spend

A bit of discipline here avoids a lot of stress later on.

3. Getting the Salary/Dividend Mix Wrong

A lot of directors either take too much as salary and pay unnecessary tax, or take dividends without checking if there are profits available.

Both can cause problems.

What to do instead:

Have a clear plan for how you pay yourself
Make sure dividends are only taken from profits
Review things regularly, especially if your income changes

This is one area where a bit of guidance can save you real money.

4. Ignoring Deadlines

Companies come with more deadlines than most people expect. Accounts to Companies House, corporation tax returns, confirmation statements, and personal tax returns all need to be filed on time.

Miss one, and you could be looking at penalties.

What to do instead:

Know your key dates from day one
Use reminders or software to stay on track
Don’t leave things until the last minute

Staying organised makes compliance straightforward rather than stressful.

5. Thinking “I’ll Sort It Later”

It’s easy to put things off in the first year, especially when you’re busy building the business.

But leaving bookkeeping, paperwork, or tax planning until the end of the year often leads to rushed decisions, and missed opportunities.

What to do instead:

Keep your records up to date monthly
Review your numbers regularly
Deal with issues as they arise, not months later

A little effort each month goes a long way.

Final Thoughts

Running a limited company doesn’t need to be complicated, but it does require a bit of structure early on.

Getting these basics right in your first year sets you up properly. You’ll have cleaner records, fewer surprises, and better tax outcomes.

How We Help

This is exactly the kind of thing we help our clients stay on top of.

From day one, we make sure you understand what you should and shouldn’t be doing. Whether that’s how to pay yourself properly, how much to set aside for tax, or simply keeping everything organised month to month.

We keep an eye on deadlines, help you avoid common pitfalls, and are there to answer questions as they come up so things don’t build up in the background.

It’s about keeping things simple and running smoothly, so you can focus on your business without worrying about what might be around the corner.

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PaperRocket are a multi award winning Chartered accounting practice, and Accredited FreeAgent Practitioners. 

We specialise in providing friendly, non-accounting jargon, services for contractors, freelancers, sole traders, and landlords across the UK.

Our fixed fee monthly accounting packages all include a FreeAgent subscription as standard and unlimited support from your allocated accountant.

To find out how we can help you please get in touch now.

Electric company cars have been one of the most talked-about tax perks for limited company directors over the last few years.  Low Benefit in Kind (BIK) rates made them incredibly tax efficient, and in some cases, almost a no-brainer.

But with BIK rates gradually increasing, a lot of directors are now asking the same question:

Is it still worth it in 2026?

How BIK on Electric Cars Works

If your limited company provides you with a car for personal use, it’s treated as a benefit.

The tax you personally pay is based on:

• The car’s list price (P11D value)
• The BIK percentage
• Your income tax rate

Electric cars have had very low BIK rates compared to petrol and diesel, which is why they’ve been so popular.

What Are the BIK Rates Now?

For fully electric cars:

• 2024/25: 2%
• 2025/26: 3%
• 2026/27: 4%

So yes the rates are increasing, but they are still low overall.

What Does That Mean in Real Terms?

Let’s take a simple example:

• Electric car list price: £50,000
• BIK rate (2026/27): 4%
• Taxable benefit: £2,000

If you’re a basic rate taxpayer:

• Personal tax = £400 per year

If you’re a higher rate taxpayer:

• Personal tax = £800 per year

That’s still relatively low compared to the cost of owning a car personally.

What About the Company?

From the company’s perspective, there are still clear advantages:

• Lease payments are generally deductible for Corporation Tax
• No fuel benefit charge if the car is fully electric
• Charging costs can often be covered tax efficiently

So it’s not just about the personal BIK, the company position matters too.

A Quick Note on VAT (Often Overlooked)

If your company leases a car that is also used personally (which is almost always the case), you can typically only reclaim 50% of the VAT on the lease payments.

The remaining 50% becomes an additional cost to the company.

This doesn’t usually make electric cars unattractive from a tax point of view, but it does affect the overall cost so it’s worth factoring into any comparison.

When It Still Makes Sense

An electric company car can still be a good option if:

• You were going to lease or buy a car anyway
• You want a newer, higher-value vehicle
• You prefer fixed monthly costs through the company
• You’re comfortable with the commitment of a lease

Even with rising BIK rates, the overall tax position is often still favourable.

When It Might Not Be the Best Option

It’s not always the right choice.

You might want to think twice if:

• You don’t really need a car
• You prefer flexibility (leasing ties you in)
• The company has inconsistent income
• You’re comparing it to a very low-cost personal vehicle

In some cases, taking dividends and running a cheaper personal car can still work out better.

The Bit People Often Miss

The decision isn’t just about the BIK percentage.

It’s about the overall cost versus benefit, including:

• The lease cost
• Corporation Tax relief
• Your personal tax
• VAT recovery on lease payments
• How you would otherwise fund a car

Two clients with identical cars can end up with completely different outcomes depending on their wider situation.

So… Is It Still Worth It?

In most cases, yes it still can be.

BIK rates are increasing, but they are still low enough that electric company cars remain one of the more tax-efficient benefits available to directors.

That said, it’s no longer the automatic choice it once was.

It’s now more about:

• Running the numbers properly
• Looking at your full situation
• Making a decision based on how you actually use your company

Final Thought

Electric cars are still a good option, just not a blanket recommendation for everyone anymore.

A quick review before committing to a lease can make a big difference, especially as costs and tax rules continue to evolve.

If you’re thinking about getting a company car and want to sense check whether it stacks up, it’s always worth running through the numbers first.

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PaperRocket are a multi award winning Chartered accounting practice, and Accredited FreeAgent Practitioners. 

We specialise in providing friendly, non-accounting jargon, services for contractors, freelancers, sole traders, and landlords across the UK.

Our fixed fee monthly accounting packages all include a FreeAgent subscription as standard and unlimited support from your allocated accountant.

To find out how we can help you please get in touch now.

As the end of the tax year approaches on 5 April 2026, it’s a good time for small limited company owners to check whether they have used the tax allowances available to them.

For most contractors, tax planning at this stage isn’t about complicated strategies. It’s usually just making sure that income and allowances have been used efficiently before the tax year closes.

Many small company owners simply want to know if there is anything they should be doing before the deadline. In most cases it comes down to checking that things like dividends, pensions and personal allowances have been used sensibly. A quick review before 5 April can often highlight simple opportunities to reduce tax.

Here are a few simple areas worth reviewing.

Check Your Salary and Dividends

Most contractor directors take a mix of salary and dividends from their company.

Before the end of the tax year it can be worth checking whether you have used your personal allowance (£12,570) and your dividend allowance (£500).

If you have taken very little dividend income during the year and your company has available profits, it may be worth declaring a dividend before 5 April 2026 to make use of these allowances.

Dividends must always be supported by company profits and properly documented.

Dividend Tax Rates Are Increasing Next Tax Year

From 6 April 2026, dividend tax rates are expected to increase.

The basic rate band is due to rise from 8.75% to 10.75%, and the higher rate band from 33.75% to 35.75%.

For contractor company owners who regularly take dividends, the timing of dividends around the end of the tax year could make a difference.

In some situations it may be more tax efficient to take dividends before 5 April 2026 rather than after, depending on your personal income levels and available profits.

Pension Contributions From Your Company

Company pension contributions can be a very tax-efficient way for directors to move profits from the company into long-term savings.

If your company makes the contribution directly:

• The company usually receives corporation tax relief
• There is no income tax or National Insurance personally

If you were planning to make a pension contribution for the 2025/26 tax year, it must be paid before 5 April 2026 to count in that year.

Use Your ISA Allowance

Although ISAs sit outside your company, many contractor directors use them alongside their company income planning.

For the 2025/26 tax year, you can invest up to £20,000 into an ISA.

Any growth or income inside the ISA is free from UK income tax and capital gains tax.

The allowance resets each tax year, so if it isn’t used by 5 April 2026 it is lost.

Consider Whether Your Spouse Uses Their Allowances

If your spouse or partner is involved in your company (for example as a shareholder), it may be worth checking whether they have used their own allowances.

Each individual has their own:

• Personal allowance
• Dividend allowance
• ISA allowance

Making use of both partners’ allowances can help keep tax bills lower overall.

Check Your Dividend Paperwork

Before the tax year closes, it’s also worth making sure that any dividends taken during the year have been properly documented.

That usually means:

• Dividend vouchers prepared
• Dividends recorded in the company accounts
• Director loan accounts kept up to date

Getting this right now makes preparing your personal tax return much easier later on.

A Quick Review Can Make a Big Difference

For most small limited company contractors, end-of-tax-year planning is simply about checking that allowances haven’t been missed.

With dividend tax rates set to rise from April 2026, it may also be worth thinking about the timing of dividends around the tax year end.

If you’re unsure whether you’ve used everything available to you this year, it’s always worth having a quick chat with your accountant before 5 April 2026.

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PaperRocket are a multi award winning Chartered accounting practice, and Accredited FreeAgent Practitioners. 

We specialise in providing friendly, non-accounting jargon, services for contractors, freelancers, sole traders, and landlords across the UK.

Our fixed fee monthly accounting packages all include a FreeAgent subscription as standard and unlimited support from your allocated accountant.

To find out how we can help you please get in touch now.

The short answer? Not really.

Today’s Spring Statement was much quieter than a full Budget. There were no new tax changes, no surprise rate increases, and no major announcements that will directly affect most business owners or landlords right now.

So if you were bracing yourself for something dramatic — you can relax.

What is the Spring Statement actually for?

Unlike the Autumn Budget, the Spring Statement isn’t usually about introducing big tax changes. It’s more of an update on the state of the UK economy.

The Chancellor mainly focused on:

• Updated economic forecasts
• Inflation expectations
• Government borrowing figures
• Growth projections

In simple terms, it’s a check-in rather than a shake-up.

Were there any tax changes?

No.

There were no changes to income tax, corporation tax, VAT, capital gains tax or National Insurance announced today. Existing rules and rates remain as they are.

That means whatever plans you already have in place can continue without needing to rethink things because of today’s statement.

Why does it still matter?

Even though nothing major changed, economic forecasts still matter.

Growth expectations, inflation predictions and borrowing levels all influence future decisions. If the economy performs better or worse than expected, that can shape what happens at the next Budget. But for now, this was very much a “steady as we go” update.

What should you do?

At this stage — nothing different.

Keep focusing on:

• Year-end tax planning
• Making use of allowances
• Reviewing profit extraction strategies
• Pension contributions and long-term planning

The Autumn Budget remains the key event for any significant tax changes.

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PaperRocket are a multi award winning Chartered accounting practice, and Accredited FreeAgent Practitioners. 

We specialise in providing friendly, non-accounting jargon, services for contractors, freelancers, sole traders, and landlords across the UK.

Our fixed fee monthly accounting packages all include a FreeAgent subscription as standard and unlimited support from your allocated accountant.

To find out how we can help you please get in touch now.

Making Tax Digital for Income Tax (MTD ITSA) is on the way and it will change how many landlords report their rental income to HMRC. If you own property personally and complete a Self Assessment tax return each year, this is something to be aware of. This post explains what’s coming, when it starts, and how to make the switch as smooth as possible.

What MTD ITSA means for landlords

At the moment, most landlords keep records however they like and send one tax return each year. Under MTD ITSA, landlords who fall within the rules will need to keep digital records, send quarterly updates to HMRC, and submit a final end-of-year declaration. It’s mainly a change to how information is reported, not how much tax you pay.

When it starts

MTD ITSA is being introduced in stages.

From April 2026 it applies if your total self-employed and rental income is over £50,000.

From April 2027 it applies if that income is over £30,000.

HMRC plans to bring in those earning over £20,000 later, but that date hasn’t been confirmed yet. The threshold is based on income before expenses, not profit.

Who it applies to

MTD ITSA will apply to individual landlords, buy-to-let owners, and anyone reporting rental income on a personal tax return. It does not apply to properties held in a limited company. Companies will continue filing accounts and corporation tax returns in the usual way.

What landlords will need to do

If you fall within MTD ITSA, you’ll need to keep digital records.

Rental income and expenses must be recorded in software that links to HMRC. You’ll send quarterly updates every three months showing a summary of income and expenses. These updates don’t create a tax bill, they simply keep HMRC informed.

After the tax year ends, you’ll submit a final declaration confirming your figures and tax due. This replaces the normal Self Assessment return.

A quick example

Sophie receives £58,000 a year in rental income. From April 2026 she must join MTD ITSA. She keeps records in software, sends quarterly updates, then files her final declaration after the year ends.

Tom receives £22,000 a year from one rental property. He won’t need to join yet because he’s below the threshold, so for now he continues with normal Self Assessment.

Our landlord accounting support

We already support many landlords using FreeAgent for Landlords and we’ve built packages specifically for property owners. Our landlord services include setting up MTD-ready software, helping to keep your records accurate, handling quarterly submissions, preparing your year-end figures, and providing ongoing support when rules change. You can find more details here.

Whether you own one rental or a growing portfolio, having the right systems in place now will make the move to MTD much easier.

Do you need to do anything yet?

If your income is below the threshold, you don’t need to join immediately. But it’s still worth preparing by moving away from paper records, checking your total rental income, getting software set up early, and speaking to your accountant before your start date. Leaving it until the last minute usually creates unnecessary pressure.

Final thoughts

MTD ITSA is a change in process rather than a new tax. Once you’re set up with digital records and the right support, it becomes part of the normal routine. For landlords, the key is knowing when it applies and getting organised early. If you’re unsure where you stand or want help getting MTD-ready, it’s far easier to plan ahead than to rush when the deadline arrives.

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PaperRocket are a multi award winning Chartered accounting practice, and Accredited FreeAgent Practitioners. 

We specialise in providing friendly, non-accounting jargon, services for contractors, freelancers, sole traders, and landlords across the UK.

Our fixed fee monthly accounting packages all include a FreeAgent subscription as standard and unlimited support from your allocated accountant.

To find out how we can help you please get in touch now.