Bookkeeping for small limited companies: a simple routine

Good bookkeeping for a small limited company comes down to three habits: keep business money separate, record every transaction with evidence, and reconcile your bank account every month. Do that and your year-end accounts become quick, cheap and stress-free – and you’ll always know where your business stands.

Here’s what the law expects, and a simple routine you can follow.

What records does a limited company have to keep?

Under the Companies Act and HMRC rules, a limited company must keep records of:

• all money coming in and going out, with details of what it was for
• everything the company owns (assets), such as equipment and vehicles
• everything the company owes (liabilities), such as loans and unpaid bills
• stock at the end of the financial year, if you sell goods
• sales and purchases, with the names of who you bought from and sold to (unless you’re a retailer)
• payroll records if you pay anyone, including directors

You also need to keep company records such as details of directors, shareholders and people with significant control.

How long do you need to keep records?

Keep your accounting records for at least 6 years from the end of the financial year they relate to. HMRC can ask to see them in that time, and you can be fined if you can’t provide them. See GOV.UK – running a limited company: records for the full list.

A simple monthly bookkeeping routine

You don’t need to be an accountant to keep tidy books. Set aside an hour or two each month and work through these steps:

1. Record your income. Make sure every sales invoice is recorded and matched to the payment that came in.
2. Capture your receipts. Photograph or upload every purchase receipt and bill as you go – don’t wait for a shoebox at year-end.
3. Reconcile your bank account. Check every transaction on your business bank statement is recorded and explained.
4. Chase what you’re owed. Look at unpaid invoices and follow them up.
5. Track the director’s loan account. Note any money you’ve personally paid in or taken out that isn’t salary, dividends or expenses.
6. Put tax money aside. Move a share of your profit into a separate account for Corporation Tax.
7. Check the VAT threshold. If you’re not VAT registered, keep an eye on your rolling 12-month turnover – registration is compulsory above £90,000.

Your bookkeeping checklist

Spreadsheet or bookkeeping software?

For a very small company with only a handful of transactions a month, a well-organised spreadsheet can be enough. Once you have regular sales, expenses and a few suppliers, bookkeeping software saves time: it pulls in your bank transactions automatically, stores receipts and makes year-end much faster.

If you’re VAT registered, you already need software that works with Making Tax Digital for VAT. Whatever you choose, we’re happy to work with it – spreadsheets included.

Common bookkeeping mistakes to avoid

• Mixing personal and business money. Always use a separate business bank account. It’s the single biggest time-saver at year-end.
• Forgetting the director’s loan account. Money you take out that isn’t salary, dividends or expenses is a loan from the company. If it isn’t repaid within 9 months of the year-end, extra tax can be due.
• Missing small receipts. Parking, postage and software subscriptions add up – and they all reduce your Corporation Tax.
• Not claiming mileage. If you use your own car for business, the company can pay you a tax-free mileage allowance of 45p a mile for the first 10,000 business miles in a tax year and 25p after that.
• Leaving it all to the end of the year. Year-end is the most expensive and stressful time to find mistakes.

Getting ready for your year-end accounts

When your financial year ends, send your accountant:

• business bank statements for the whole year
• your sales invoices and any other income records
• receipts and bills for business expenses
• details of anything bought for more than a few hundred pounds (assets)
• loans and finance agreements
• your director’s loan account summary

With tidy records, PeekaBooks can prepare and file your limited company accounts for £199, or £99 if your turnover is under £5,000. Not sure when they’re due? Check with our free deadline calculator.

Frequently asked questions

Do I have to use bookkeeping software for my limited company?

Not unless you’re VAT registered, in which case Making Tax Digital for VAT means you must keep digital records and file VAT returns with compatible software. Otherwise a spreadsheet is fine, as long as your records are complete and accurate.

How long should a limited company keep receipts?

Keep receipts and other accounting records for at least 6 years from the end of the financial year they relate to. Digital copies are fine, as long as they’re clear and complete.

Can I do my own bookkeeping?

Yes. Many small company directors do their own bookkeeping and leave the year-end accounts and tax returns to an accountant. A simple monthly routine is usually all it takes.

What is a director’s loan account?

It’s a record of money moving between you and your company that isn’t salary, dividends or a business expense – for example personal spending on the company card, or money you lend to the company. It must be shown in your company’s accounts.

Make your year-end painless

Keep on top of your books through the year, and let us handle the rest. PeekaBooks prepares your accounts and files them with Companies House and HMRC for a fixed fee, with a real person to talk to. Get a free quote.