Becoming a company director takes very little time. Responsibilities begin the same day as you incorporate your company and become a director of it, or otherwise become a director of any other company. Many first-time directors only learn what it involves when something goes wrong.
The most common assumption is that limited liability protects a director personally in every situation.
In most cases it does, but there are specific circumstances where a director’s own money, or their ability to run a company in future, is at risk.
Read on to work through those circumstances, along with the checks and habits that prevent the most common first-year problems.
What Limited Liability Doesn’t Protect You From
A limited company is a separate legal person. The company’s debts are its own, and a shareholder’s loss is normally limited to what they paid for their shares. Your duties as a director, however, are personal.
The Companies Act 2006 sets out seven general duties, including acting within the company’s constitution, promoting its success, exercising independent judgement and avoiding conflicts of interest.
In August 2026, the Insolvency Service added a page on director misconceptions to its Director Information Hub, and several of its points surprise new directors.
Every director is accountable, including those who take no part in day-to-day decisions. A lack of financial knowledge isn’t a defence, because all directors are expected to understand and monitor the company’s finances.
Anyone who acts as a director, or controls decisions from behind the scenes, can carry the same responsibilities as a formally appointed director.
Where liability can become personal, it’s usually in one of these situations:
- Personal guarantees: Banks, landlords and some suppliers ask directors of new companies to guarantee the company’s debts. If the company can’t pay, the lender can pursue you for the amount guaranteed.
- Wrongful trading: If you carry on trading after you knew, or ought to have concluded, that the company couldn’t avoid insolvent liquidation, a court can order you to contribute to its debts.
- Unpaid tax in serious cases: HMRC can issue a personal liability notice for National Insurance the company failed to pay because of a director’s fraud or neglect. It can also issue joint liability notices where tax is lost through avoidance, evasion or repeated insolvency.
- Disqualification: Misconduct can lead to disqualification from acting as a director for up to 15 years.
These risks matter most when a company is struggling. Once a company is insolvent or close to it, directors must consider creditors’ interests and treat creditors equally. That means not repaying your own loans, or debts you’ve personally guaranteed, ahead of other creditors.
Verifying Your Identity Before You’re Appointed
Since 18 November 2025, anyone becoming a director must verify their identity with Companies House before the appointment is notified.
For a new company, that means before incorporation. Acting as a director without verification is a criminal offence, both for the individual and for the company that allows it.
Verification is free through GOV.UK One Login, using the app or the online service, or you can pay an authorised corporate service provider to do it for you. Either way, you’ll receive a Companies House personal code, which you’ll use for every company role you hold.
If you’re joining an existing board, check that the other directors have verified too. Directors appointed before 18 November 2025 must provide their personal code with the company’s next confirmation statement, and the 12-month transition period for existing directors ends in mid-November 2026.
A missing code can stop the company filing its confirmation statement at all.
Taking Money Out of the Company
If you’ve moved from sole trader to a limited company, the biggest adjustment is that the money in the business account belongs to the company. You can only take it out in a few ways, and each one has its own paperwork and tax consequences.
Salary
A salary is paid through PAYE, so the company must register as an employer before the first payday, and it can’t register more than two months beforehand. Directors’ National Insurance is usually calculated over the whole year rather than for each pay period, and payroll software needs to be set up for that.
Dividends
Dividends can only be paid from distributable profits, which broadly means accumulated realised profits after deducting accumulated losses.
A dividend paid without enough profits is unlawful. A shareholder who knew, or had reasonable grounds to believe, that it was unlawful must repay it, and the directors who approved it can be held responsible. Each dividend should be supported by up-to-date figures, a board minute and a dividend voucher.
From 6 April 2026, dividends above the £500 allowance are taxed at 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band. If you receive more than £10,000 in dividends in a year, you’ll need to file a Self Assessment return.
Director’s Loans
Any money you take that isn’t salary, a dividend or a repayment of expenses is recorded in your director’s loan account. If you owe the company money at its year end and don’t repay it within nine months and one day, the company pays section 455 tax on the balance. For loans made from 6 April 2026, the rate is 35.75%.
The company can reclaim the tax once the loan is repaid, but only nine months and one day after the end of the accounting period in which the repayment happens. A loan above £10,000 can also create a taxable benefit for you.
Take Priya, who sets up a consultancy company and transfers £1,500 a month to her personal account without declaring a salary or dividends.
By year-end, she owes the company £18,000. If that balance is still outstanding nine months and one day later, the company owes £6,435 in section 455 tax, and Priya may also face a benefit-in-kind charge because the loan exceeded £10,000. Our guide to section 455 tax explains the options for clearing a loan balance.
The Deadlines That Start at Incorporation
A new company’s deadlines are calculated from different dates, which is one reason first-year directors miss them.
Some run from incorporation, some from the date the company starts trading and some from the end of its accounting period. The main obligations are:
| Obligation | Deadline |
| Register for Corporation Tax | Within three months of starting to trade |
| First confirmation statement | Within 14 days of the first anniversary of incorporation |
| First accounts at Companies House | 21 months from incorporation |
| Corporation Tax payment | Nine months and one day after the end of the accounting period, for most small companies |
| Company Tax Return | 12 months after the end of the accounting period |
| PAYE registration | Before the first payday |
| VAT registration | Within 30 days of the end of the month in which rolling 12-month taxable turnover exceeds £90,000; separate rules apply if you expect taxable turnover to exceed £90,000 in the next 30 days alone |
The first set of accounts can cover more than 12 months, but a Corporation Tax accounting period can’t. A company whose first accounts run for 15 months will usually file two Company Tax Returns for that period, and pay Corporation Tax on two separate dates.
Every company also needs a registered office at an ‘appropriate address’, where post can be received and acknowledged, and a registered email address for Companies House correspondence.
The confirmation statement costs £50 to file online, and our guide to confirmation statements explains what it contains.
The Records and Filings Every Director Is Responsible For
Running a company involves formal records and filings that sole traders never deal with. None of them is complicated on its own, but together they’re where new directors most often fall behind, and several carry automatic penalties. These are the main ones, and what each involves.
Board Decisions and Minutes
Directors make most decisions about the business, from signing contracts to paying interim dividends, and the law requires a record of them. Minutes of directors’ meetings must be kept for at least 10 years. Under the model articles most companies use, the same applies to decisions directors make without holding a formal meeting.
Company law is less explicit about sole directors, because a meeting usually involves more than one person, but keeping the same record is standard practice and your best evidence of what was decided.
If you’re the only director and you decide to pay a dividend, approve the annual accounts or sign a lease, the decision should be written down, dated and signed. Minutes don’t need to be long. They should record who was present, what was decided and the reasons for any significant decision, particularly where the company pays money to a director.
Shareholder Resolutions
Some decisions belong to the shareholders rather than the directors, even when you’re both.
Shareholders make these decisions by passing a resolution, either at a general meeting or, in a private company, as a written resolution circulated for signature. Private companies don’t have to hold an annual general meeting unless their articles require one.
An ordinary resolution needs more than half the votes, and a special resolution needs at least 75%. For a written resolution, those percentages apply to the total voting rights of all eligible shareholders, not just those who reply. The decisions new directors most often need are:
| Decision | Type of resolution |
| Declaring a final dividend (under the model articles) | Ordinary |
| Approving a loan to a director of more than £10,000 | Ordinary |
| Approving a director’s service contract guaranteed to last more than two years | Ordinary |
| Removing a director before their term ends | Ordinary, passed at a meeting after special notice |
| Changing the articles of association | Special |
| Changing the company name | Special, unless the articles allow another method |
| Reducing share capital | Special |
Special resolutions, and some ordinary ones, must be filed at Companies House within 15 days of being passed. Minutes of general meetings and copies of written resolutions must be kept for at least 10 years.
The loan row matters more than it looks. An overdrawn director’s loan account is a loan, so once yours goes above £10,000, you generally need shareholder approval before you draw down the money, subject to statutory exceptions. That’s easy to overlook when you also own all the shares, but you still need to record the approval in writing.
Your Company’s Own Records
Since 18 November 2025, companies no longer have to keep their own registers of directors, directors’ home addresses, secretaries or people with significant control.
The Companies House record now serves that purpose, so companies must file any change there within 14 days. The exception is the register of members, the list of shareholders and their holdings, which every company must still keep and update whenever shares are issued or transferred.
The company must also keep accounting records that show its transactions and financial position at any time. Company law requires a private company to keep them for three years, but HMRC requires six years from the end of the accounting period they relate to, so six years is the practical minimum.
The Confirmation Statement
The confirmation statement is an annual check that the information Companies House holds about your company is correct. It contains no financial figures.
According to Companies House guidance, you must file changes to the registered office, registered email address, officers, or people with significant control separately before you submit it. The statement itself confirms:
- Company details: The registered office, which must be an ‘appropriate address’ where post can be received and acknowledged, the registered email address and the SIC code describing what the company does.
- Shares and shareholders: The statement of capital, and any changes to shareholders since the last statement.
- People with significant control: Anyone holding more than 25% of the shares or voting rights, or who otherwise controls the company.
- Lawful purpose: A statement, required since March 2024, that the company’s intended future activities are lawful.
During the identity verification transition, it’s also where existing directors provide their personal codes. You must file at least once every 12 months, within 14 days of the end of the review period, and it costs £50 online.
Failing to file is an offence, Companies House can issue a financial penalty, and it can strike the company off the register. Our guide to confirmation statements explains the process in more detail.
Annual Accounts
Every company must prepare annual accounts, and directors must approve and sign them before sending them to shareholders and filing them at Companies House. After the first set, the filing deadline is nine months from the end of the accounting period.
Smaller companies can file simplified versions. A micro-entity, meaning a company that meets at least two of three limits (turnover up to £1 million, a balance sheet total up to £500,000 and no more than 10 employees, for financial years starting on or after 6 April 2025), can file a very brief balance sheet, and most small companies are exempt from audit.
Late filing penalties are automatic and charged to the company. They’re £150 if the accounts are up to one month late, £375 up to three months, £750 up to six months and £1,500 after that, and they double if the company files late two years in a row.
Corporation Tax
Corporation Tax is charged on the company’s taxable profit. That’s the profit in its accounts, adjusted for items the tax rules treat differently. Client entertainment, for example, isn’t deductible, and equipment usually qualifies for capital allowances instead of depreciation.
The rate is 19% on profits up to £50,000 and 25% on profits above £250,000. Between those figures, marginal relief applies, which gives a marginal tax rate of 26.5% on additional profits within that band. Both limits are divided between associated companies and reduced for accounting periods shorter than 12 months.
The company files its Company Tax Return (CT600) online, together with its accounts and tax computations, within 12 months of the end of the accounting period. Payment is due earlier, nine months and one day after the period ends, for companies with profits under £1.5 million.
For returns due on or after 1 April 2026, HMRC’s late filing penalties are £200, rising to £400 after three months, with further penalties of 10% of any unpaid tax at six and 12 months late. A company that files late three times in a row pays £1,000 penalties instead of £200. Late payment is charged interest at the Bank of England base rate plus 4%.
Joining the Board of an Existing Company
Being appointed to a company that’s already trading carries a different kind of risk. You’re not normally responsible for decisions made before your appointment, but from the day you join, you share responsibility for dealing with any problems the company already has.
The Insolvency Service also warns against agreeing to act as a director on someone else’s behalf, since you take on full legal responsibility and could be prosecuted if that person isn’t allowed to be a director.
Before you accept an appointment, check the following:
- Filing history: Search the company on Companies House for overdue accounts or confirmation statements, and confirm the existing directors have verified their identities.
- Tax position: Ask whether Corporation Tax, VAT and PAYE are up to date, and whether the company has any payment plans in place with HMRC.
- Director’s loan accounts: Find out whether any director owes the company money, and how much section 455 tax could be due as a result.
- Recent management accounts: Review the latest figures so you understand the company’s cash position before you share responsibility for its decisions.
- Insurance and guarantees: Ask whether the company holds directors’ and officers’ insurance, and whether you’ll be expected to give a personal guarantee.
Resigning Doesn’t End Your Responsibility
Resigning as a director ends your future duties, not your past ones. You remain responsible for decisions taken while you held the role, and the Insolvency Service can investigate the conduct of every director of an insolvent or dissolved company, including those who resigned before it failed.
A personal guarantee also continues after you resign unless the lender agrees to release you, so ask for a written release as part of leaving.
The company must notify Companies House of your resignation within 14 days, and you should check the public register afterwards to confirm the change has been recorded.
Setting Up Your First Year as a Director Properly
Most first-year problems start with arrangements made in the first few weeks. Money drawn without a decision on how it’ll be treated, a registration nobody made, or a dividend paid without current figures can all create costs that are hard to reverse later.
At Double Point, we help new directors set up payroll, dividend paperwork and a clear record of their director’s loan account from the start, and we track every filing deadline for the company. If you’re joining an existing board, we can review the company’s accounts and tax position before you accept.
Our company accounts team also prepares your first-year accounts and Company Tax Returns.
If you’ve recently become a director, or you’re about to, book a free consultation and we’ll check what needs to be in place.
Disclaimer: General information only, not advice. Rules and figures can change. Take advice on your own circumstances before acting.