What does a one-person limited company actually have to file?
If you contract or freelance through your own limited company, even as the only person in it, the company is its own legal thing in the eyes of the law. That brings a fixed set of yearly jobs, and they go to two different places.
- Your Company Tax Return (the CT600) to HMRC. This sets out your profit and the Corporation Tax you owe.
- Your statutory accounts to HMRC, sent with the CT600 as one return, and a version of those same accounts to Companies House.
- Your confirmation statement to Companies House. This is not a tax return and it does not work out any tax. It is a yearly tick to confirm your company's basic details (who owns it, what it does) are still correct.
HMRC and Companies House are two separate government bodies. Your tax goes to HMRC. Your public record goes to Companies House. Most of the figures come from the same year, but they are still two filings to two places. The confirmation statement is a third, simpler job that just keeps your company's listing current.
The big one for tax is the CT600 with your accounts. That is what tells HMRC how much profit your company made and how much Corporation Tax is due on it. Being a one-person company does not get you out of any of this. The rules are the same as for a company with a hundred staff, just with smaller numbers.
Why do most contractors take a small salary and the rest as dividends?
When you work through your own company, the money your clients pay belongs to the company first, not to you. To get it into your own pocket, you usually pay yourself in two ways: a salary and dividends. They are taxed differently, and they are treated very differently on your tax return, so it is worth knowing which is which.
Salary is a company cost
If the company pays you a salary through payroll, that salary is a genuine business cost. It comes off the company's profit before Corporation Tax, the same as any other wage. Many one-person companies set a modest salary, often around the level where it makes use of your tax-free personal allowance and keeps your National Insurance record ticking over. The exact best figure depends on your own situation and changes year to year, so this is one to set with care.
Dividends are not a company cost
Dividends are different, and this is the part people most often get wrong. A dividend is a share of the company's profit paid out to you as the owner. It is paid out of profit that has already had Corporation Tax taken off it. Because of that, a dividend does not reduce your Corporation Tax bill at all. The company pays its tax first, then what is left can be paid out as dividends. You pay your own personal tax on those dividends separately, through your own Self Assessment if it is due.
So the headline is simple: your salary lowers the company's tax, your dividends do not. Putting a dividend through as if it were an expense is a common and costly mistake. We never treat it as one.
Your company makes £40,000 of profit and pays £7,600 of Corporation Tax on it (19 percent). That leaves £32,400. If you then take £25,000 of that as dividends, the Corporation Tax stays at £7,600. The dividend did not change the company's tax by a penny, because it came out of profit that was already taxed.
Getting the salary and dividend mix right for your own circumstances is a personal tax question, and for anything complicated an accountant may be the better fit. What we do is file the company's return correctly off whatever split you have actually paid, so the company side is always right.
What expenses can a contractor or freelancer actually claim?
One test decides whether a cost counts: was it spent purely to run the business? If yes, it usually comes off your income before Corporation Tax is worked out, so it is money you do not pay tax on. If it was partly personal, you can only claim the business share. Here are the costs contractors and freelancers genuinely tend to have.
- Equipment you keep and use: a laptop, a monitor, a phone, tools. For almost every small company the full cost comes straight off your profit in the year you buy it, up to a very high yearly limit, so it cuts your tax just like a normal cost.
- Software and subscriptions: the design tools, cloud services, code editors, accounting software and other paid-for tools you need to do the work.
- Business travel: train fares, parking, and the cost of driving for the business. Your normal commute to a regular workplace is not included. If you drive your own car for business journeys you claim a set rate per business mile (45p a mile for the first 10,000 business miles in a year, then 25p after that) rather than your actual petrol.
- Professional subscriptions: membership of a professional body that relates to your work, where the body is on HMRC's approved list.
- Use of home: if you genuinely work from home, the company can pay you a set amount towards the extra cost (a flat £6 a week is the simple route) without you having to total up your household bills. You do not put your personal rent or mortgage through the company.
- Pension contributions: the company can pay into a pension for you as the director, and a contribution made wholly for the business is usually an allowable cost that lowers the company's profit. This is one of the more useful ones for contractors, and the amounts can be meaningful.
If you paid for it purely to run the business and you have kept a record of it, it counts. A couple of things look like normal costs but follow their own rules: taking a client out (client entertaining) can be paid by the company but does not cut your Corporation Tax, and anything part-personal only goes in for the business share. We apply those rules for you so nothing goes in that should not.
In a year you buy a £1,400 laptop, pay £600 for software subscriptions, and put £4,000 into your pension through the company. All £6,000 comes off the company's profit before tax. At the small profits rate that is roughly £1,140 less Corporation Tax than if you had claimed nothing, and you still have the laptop, the software and the pension pot.
Company money is not your money: the director's loan account
This is the idea that catches out more first-time contractors than any other. The money in the company's bank account belongs to the company, not to you. You get it out properly in one of three ways: a salary through payroll, a dividend out of profit, or paying yourself back for a real business cost you covered personally.
If you take money out that is none of those three (a quick transfer to cover a personal bill, say) it does not just disappear. It is recorded as a loan from the company to you, the director. The plain-English name for the running total is your director's loan account. If the company owes you money, the account is in your favour. If you owe the company money, it is the other way round, and that can have a tax cost.
The bit to know: if you owe the company money at the year-end and you have not paid it back within nine months of that year-end, the company has to pay an extra tax charge on the amount still owed. That charge is refunded to the company once you repay the loan, but it is real money tied up in the meantime. The simple way to avoid all of it is to keep personal spending out of the business account and only take money out as salary or dividends.
Your year ends on 31 March. During the year you moved £3,000 out of the company account for personal use that was not salary, a dividend or an expense. If that £3,000 is still owed by you nine months and one day after year-end, the company faces an extra tax charge on it (just over £1,000), which it gets back once you repay the £3,000. Repay it in good time and there is no charge at all.
A contractor's year, from invoices to tax bill
Here is how the pieces fit together for a typical one-person company over a year. The numbers are made up but the steps are exactly how it works.
You invoice clients £60,000 over the year. The company pays you a salary of £12,570. You have £7,430 of allowable business costs (equipment, software, business travel, your professional subscription and a pension contribution). Your profit is what is left:
- Income: £60,000
- Minus salary (a company cost): £12,570
- Minus allowable expenses: £7,430
- Profit the company pays tax on: £40,000
At the small profits rate of 19 percent, Corporation Tax on £40,000 of profit is £7,600. That leaves £32,400 of after-tax profit. You can pay some or all of that £32,400 out to yourself as dividends. Those dividends do not change the £7,600 the company already owes, and you handle any personal tax on them separately.
Most contractors and freelancers sit comfortably in the small profits band, so at a high level the 19 percent rate is the one that tends to apply. Companies with much larger profits pay more, on a sliding scale up to a higher main rate, but that is well above where a typical one-person company lands. We work out the exact rate and any in-between relief for your figures, so you do not have to.
The deadlines you cannot miss
Everything counts from the day your company's financial year ends (your year-end). There are three dates, and the order surprises people: you pay the tax before you file the tax return.
- Pay your Corporation Tax to HMRC: 9 months and 1 day after your year-end.
- Send your Company Tax Return (the CT600 with your accounts) to HMRC: within 12 months of your year-end.
- Send your accounts to Companies House: within 9 months of your year-end.
Yes, you pay first and file second. You work out what you owe, pay it by 9 months and 1 day, and you still have a few more months before the tax return itself has to be in. In practice most one-person companies do it all in one go, well before the pay date, so they know the figure and pay on time.
If your year ends on 31 March 2026, your accounts are due at Companies House by 31 December 2026, your Corporation Tax payment is due by 1 January 2027, and your tax return is due at HMRC by 31 March 2027. A different year-end shifts the dates, but the gaps are always the same.
Filing late starts a penalty even if you owe no tax, and paying late adds interest on top. The confirmation statement has its own yearly due date at Companies House too. Missing any of these is avoidable, and the whole point of doing it early is that you are never caught out by the pay-first rule.
How SimpleReturns handles the whole thing
You do not need to know any of the above to file. You connect your bank or upload a statement, and we read in the money that came into the company and the money that went out over the year.
From that, our smart system sorts each payment into the right place, adds up the costs your company is allowed to claim, applies the special rules for equipment, pensions and entertaining, and works out your profit and the Corporation Tax on it. We build your statutory accounts and your CT600, show you every figure to check, and once you are happy we file to both HMRC and Companies House for you.
One flat price of £99 for the submission, paid once, no subscription. For a straightforward one-person contractor or freelancer company, that is the whole job done.