Author: Glenn

A limited company is a separate legal entity. In normal circumstances, its debts belong to the company, not to the directors. This is one of the central advantages of incorporation. However, the protection is not absolute. Directors have duties in law, and if those duties are not met, there are situations where personal liability can arise. Understanding the main risk areas helps directors manage their responsibilities with confidence.

The most common route to personal liability is through personal guarantees. These are often required when arranging finance or long term commitments. They appear in bank loans, leases, asset finance, invoice discounting and sometimes supplier credit arrangements. A personal guarantee means that, if the company cannot pay, the director promises to pay instead. Many directors accept guarantees without fully recognising their implications, sometimes as part of standard paperwork. If the business later becomes insolvent, the creditor may enforce the guarantee directly against the director.

Another area where liability can arise is wrongful trading. This occurs when directors continue to trade at a point where they knew, or should have known, that the company was unlikely to avoid insolvency. Once insolvency becomes likely, directors must act to minimise losses for creditors. Continuing to take new orders, incur new debts, or draw full salaries without regard to the company’s position may be seen as failing in that duty. If wrongful trading is found, a director can be required to contribute personally towards the shortfall to creditors.

Fraudulent trading is a more serious matter. This involves intent to deceive. Examples include deliberately misleading creditors, falsifying records, or taking payment from customers when it is clear the business will not be able to supply. In these cases, personal liability is likely, and criminal sanctions may also be possible.

Misfeasance relates to breach of duty. Directors must act in the best interests of the company and use company assets responsibly. Issues arise where funds are drawn inappropriately, company assets are used personally, records are not maintained, or tax liabilities are ignored. If the company enters liquidation, transactions will be reviewed. Directors may be required to repay sums that were taken improperly.

HMRC can also pursue directors personally in some situations. If there is repeated or deliberate non-payment of PAYE, NIC or VAT, HMRC may issue a personal liability notice. This is generally used where behaviour is seen as deliberate or reckless rather than a one-off difficulty.

If a company fails and a related business continues afterwards, this can also be examined. Forming a new business after insolvency is not itself prohibited, but if it appears to be an attempt to avoid debts unfairly, directors may face investigation or disqualification.

Good practice reduces risk. Clear financial records, cash flow forecasting, early advice when trading becomes difficult, care with drawings, and caution when asked to sign guarantees all help protect directors.

1 December 2025 – Due date for Corporation Tax payable for the year ended 28 February 2025.

19 December 2025 – PAYE and NIC deductions due for month ended 5 December 2025. (If you pay your tax electronically the due date is 22 December 2025).

19 December 2025 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2025. 

19 December 2025 – CIS tax deducted for the month ended 5 December 2025 is payable by today.

30 December 2025 – Deadline for filing 2024-25 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2026-27.

1 January 2026 – Due date for Corporation Tax due for the year ended 31 March 2025.

19 January 2026 – PAYE and NIC deductions due for month ended 5 January 2026. (If you pay your tax electronically the due date is 22 January 2026).

19 January 2026 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2026. 

19 January 2026 – CIS tax deducted for the month ended 5 January 2026 is payable by today.

31 January 2026 – Last day to file 2023-24 self-assessment tax returns online.

31 January 2026 – Balance of self-assessment tax owing for 2024-25 due to be settled on or before today unless you have elected to extend this deadline by formal agreement with HMRC. Also due is any first payment on account for 2025-26.

A Company Voluntary Arrangement (also known as a CVA) is a special arrangement that allows a company with debt problems or that is insolvent to reach a voluntary agreement to pay its business creditors over a fixed period of time.

The arrangement is similar to the Individual Voluntary Arrangement (IVA) that can be used by a sole-trader or self-employed person who is unable to pay their debts.

An application for a CVA can only be made with the agreement of all directors of the company in question or all of the partners of a limited liability partnership (LLP). A CVA can only be created by using the services of an insolvency practitioner. They will be responsible for set up and administration of the arrangement.

Once an insolvency practitioner has been appointed the following steps will take place:

1. The insolvency practitioner will work out an ‘arrangement’ covering the amount of debt the company can pay and a payment schedule. They must do this within a month of being appointed.
2. The insolvency practitioner will write to creditors about the arrangement and invite them to vote on it.
3. A CVA must be approved by creditors representing at least 75% of the debt value of those who vote (rather than 75% of the total overall debt).

If the agreement is approved and the company does not meet the terms of the CVA then any of the creditors can apply to have the business wound up.

There is a trivial benefit-in-kind (BiK) exemption that applies to small, non-cash gifts (such as a bottle of wine or a bouquet of flowers) that are occasionally given to employees.

This exemption enables employers to offer modest, tax-efficient rewards while simplifying the administration of BiKs. The BiK exemption allows businesses to recognise employees in a small way without creating additional reporting obligations or tax liabilities.

Trivial benefits are a simple and effective way to provide gestures of goodwill or recognition, as long as they are not given as a reward for work performed or duties carried out. Typical qualifying occasions include events such as a marriage, the birth of a child or other personal landmarks.

Employers also benefit since these trivial BiKs do not need to be included in PAYE settlement agreements or reported on P11D forms, and they are exempt from Class 1A National Insurance contributions.

The tax exemption applies to trivial BiKs where the benefit:

• costs £50 or less;
• is not cash or a cash voucher;
• is not a reward for work or performance; and
• is not in the terms of an employee’s contract.

Trivial benefits provided through a salary sacrifice arrangement are not exempt from tax. In such cases, the employer must report them on form P11D, using the higher of the amount of salary the employee gave up, or the cost of the trivial benefit provided.

For directors or officeholders of close companies (and their families), there is an annual cap of £300 on trivial benefit gifts. The £50 limit still applies per gift but allows up to £300 of non-cash benefits per person each year. If any single gift exceeds £50, the full value becomes taxable.

Most employees will come across forms such as the P45, P11D and P60 during their working life, and knowing what each one is for can make it much easier to keep track of your tax position.

A P45 is issued to employees who leave their employment or lose their job. The P45 shows how much tax you have paid during the current tax year (6 April to 5 April). The form has four parts: your employer sends Part 1 to HMRC, gives you Part 1A for your records, and you pass Parts 2 and 3 to your new employer or Jobcentre Plus. Employers are legally required to issue a P45. If you do not have one, for example when starting your first job then your new employer will ask for details via a starter checklist to determine your correct tax code.

A P11D form is used by employers to list certain ‘benefits in kind’ provided to directors or employees. P11D forms are used to provide information to HMRC on all Benefits in Kind (BiKs), including those under the Optional Remuneration Arrangements (OpRAs) unless the employer has registered to payroll benefits. Payrolling benefits removes the requirement to complete a P11D for the selected benefits. The completed P11D form is submitted annually to HMRC. The deadline for submitting the 2025-26 form is 6 July 2026. The form can be submitted using commercial software or via HMRC’s PAYE online service.

The P60 is a statement issued to employees after the end of each tax year that shows the amount of tax they have paid on their salary. Employers can provide the P60 form on paper or electronically. Employees should ensure they keep their P60s in a safe place as it is an important record of the amount of tax paid. The deadline for employers to provide employees with a copy of their P60 form for the 2025-26 tax year is 31 May 2026. A P60 must be given to all employees that were on the payroll on the last day of the 2025-26 tax year.