What is Limited Company? UK Definition 2026/27
Quick Answer
A business structure where the company is a separate legal entity from its owners.
Definition of Limited Company
A limited company is a business structure where the company itself is a separate legal entity. Shareholders have limited liability - they can only lose their investment. Companies pay Corporation Tax on profits. Directors can extract profits through salary and dividends, often more tax-efficiently than self-employment.
Limited Company — Key Facts for 2026/27
| Corporation Tax | 19-25% |
| Minimum directors | 1 |
| Companies House fee | £12-£50 |
| Annual filings | Confirmation statement + accounts |
How Limited Company Works — Example
- 1Self-employed: ~£14,500 tax + NI
- 2Ltd company (optimal extraction): ~£11,500 tax
- 3Annual saving: ~£3,000
- 4Admin cost: ~£1,000-£1,500
- 5Net benefit: ~£1,500-£2,000
How Limited Company Affects Your Tax
Limited companies offer tax efficiency, limited liability, and credibility. However, they involve more admin, filing requirements, and making finances public. Generally beneficial for profits over £30,000+.
Official HMRC Guidance on Limited Company
For official guidance, refer to HMRC's documentation. Tax rules can change, so always verify current rates and thresholds on gov.uk.
GOV.UK: Setting up a limited companyFrequently Asked Questions about Limited Company
Related Tax Terms
Accuracy Note
This information is for guidance only and is based on 2026/27 tax year rates. Tax rules are complex and your circumstances may differ. For personal advice, consult a qualified accountant or tax adviser.