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.

Current estimates suggest that there are around 5.6 million businesses operating in the UK. This figure comes from the Department for Business and Trade and the Office for National Statistics. What stands out is that most of these businesses are very small. The vast majority are run by one person, without employees, either as sole traders or small limited companies. Only a small proportion of the total business population consists of medium or large organisations, yet those larger firms account for a significant share of total employment and economic output.

Around 4.1 million of the 5.6 million businesses are sole traders. These include contractors, tradespeople, freelance workers, independent professionals, and small retail or service businesses. A further 1.1 million are limited companies. The remainder are partnerships or other legal forms. Approximately three quarters of all UK businesses have no employees at all. They are operated directly by the owner.

The UK has a relatively low barrier to starting a business. Registering as self-employed is straightforward, and forming a limited company is inexpensive and quick. This ease of entry encourages individuals to test ideas, create income streams, or change the way they work. Digital platforms have also expanded opportunities. For example, selling through online marketplaces, providing services remotely, or trading through social media channels has become increasingly common. These models enable people to run small businesses from home, with minimal overheads.

There is also a lifestyle element. Many individuals value autonomy over working hours and location. Self-employment or small business ownership provides this flexibility. Some move into business ownership after redundancy or a change in circumstances, while others start with the intention to grow something long term.

Although many of these businesses operate on a modest scale, collectively they play a major role in the economy. They support local employment, supply chains, and community activity. They bring specialist skills to market and allow rapid adaptation when customer needs change. Small businesses tend to be agile and close to their customers.

However, small businesses also face challenges. These include managing cash flow, understanding tax obligations, accessing finance, and dealing with administrative requirements. The owner often carries full responsibility, which can create pressure. Support, planning, and advice can therefore have a very positive impact.

The main message is that small business is central to the UK economy. It is diverse, active, and resilient, and it continues to shape how people work and earn today.

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.

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.

It is quite common for tax codes to be wrong, particularly if your income or employment situation has changed, so it is worth taking a few moments to check that HMRC has the correct information about you.

HMRC usually updates your tax code automatically when your income changes, using information provided by your employer. However, if HMRC has inaccurate details about your income you may be given an incorrect tax code. To fix this, ensure HMRC has your up-to-date income details and check what you need to do if you are on an emergency tax code.

If you believe your tax code is wrong, you can use HMRC’s Check your Income Tax online service to update employment details or to report income changes that might affect your tax code. For example, you can add company benefits, missing income sources, claim employment expenses and update your estimated taxable income. HMRC may then adjust your tax code based on these updates.

If you cannot access the online service, you can contact HMRC directly. Once your details are updated, HMRC will inform both you and your employer or pension provider if your tax code changes. Your next payslip should show your new code and any corrections to your pay.

At the end of the tax year, if you have paid too much or too little tax, HMRC will issue either a P800 tax calculation letter or a Simple Assessment letter to explain any refund or amount owed.