Designed for non-VAT registered businesses, we'll do your bank reconciling so you can relax knowing it's done right, and on time.

Bank reconciliation - non-VAT registered companies

A 12-month plan designed for new business owners who may want some extra guidance around business structure, accounting software setup and training, and more.

We will provide you with guidance and support on what you'll need to do to establish and commence running your new business

We can provide advice on the best business structure for your needs and take care of establishment and registrations

Set up your Xero file so it's optimised for you and give you initial training so you start off in the right way

Preparation of a budget tailored to your business and input into Xero so you can track how you're going

Starter Pack

We will help get your business officially incorporated

Company formation

Designed for sole trader businesses, we'll do your bank reconciling so you can relax knowing it's done right, and on time. Take one less task off your plate.

Bank reconciliation - sole trader businesses

A 12 month plan designed for established businesses. Additional support in the form of management accounts and time with your accountant

Completing quarterly management accounts tailored to your business requirements and aligned to your VAT quarters

Quarterly meetings with your accountant to chat business planning, strategy, or questions about your management accounts

Success pack

The initial setup of your Xero accounting software tailored to your business's needs, plus a one hour training session where you'll learn the best practices for bookkeeping and financial tracking.

Xero setup & training

We prepare your quarterly VAT returns ready for you to review and pay.

Prepare VAT

Discover how to pay dividends correctly and plan your salary-dividend mix for tax efficiency.

FINANCIAL LITERACY  •  24 OCTOBER 2025  •  5 MIN READ

Learn how dividends work for UK limited companies, including tax rates, and how to balance dividends with salary to maximise take-home pay.

Understanding Dividends for UK Business Owners

You’ve done the hard work and successfully generated a profit. Now comes one of the most exciting and often most confusing decisions a UK business owner faces “how do I take that money out of the company?”

For limited company owners, this decision usually comes down to two options: a salary or dividends.

Choosing the right mix of the two is the key to maximising your personal take-home pay while keeping your tax liabilities as low as possible. Since dividends are not subject to National Insurance Contributions (NICs) and have a lower income tax rate than a salary, they are often a tax-efficient way to extract profits from your business.

In this guide, we’ll cut through the jargon to explain exactly what dividends are, the crucial legal rules you must follow to pay them properly, and the balancing act of keeping money in the business and taking some out.

At its simplest, a dividend is a share of a company’s profits distributed to its shareholders. The key thing to remember is that dividends are paid from the company’s profits after Corporation Tax has already been accounted for. (This means that dividends are not tax-deductible for corporation tax.)

This is also where the law gets specific. Dividends can only be declared and paid if there are sufficient ‘distributable reserves’. Think of these reserves as the company's "savings pot" of accumulated, realised profits over its lifetime, not just the profit you made last month.

It’s crucial to note that simply having a healthy net profit for the current year, or having cash sat in your bank account, does not automatically mean you can pay a dividend. These distributable reserves legally exclude any share capital or certain restricted reserves. If your company has accumulated losses from previous years, for instance, those losses must be covered before any money can be paid out as a dividend.

This legal requirement to check your reserves is the cornerstone of compliant dividend payment, and getting it wrong is unfortunately one of the most common mistakes business owners make.

For a dividend to be compliant, it must follow strict procedures laid out in the Companies Act 2006.

1. Pass the solvency test (can the company afford it?)

Before a dividend is authorised, the directors have a duty to ensure the company remains solvent after the dividend is paid. This means:

The company must still be able to pay its debts as they fall due, AND

 The value of the company’s assets must be greater than its liabilities

A dividend isn’t official until it’s formally declared. This requires a director’s meeting and a resolution to be passed (even if you’re the sole director and shareholder). You must keep minutes of the meeting as they’re legal evidence that the directors checked the company’s financial position and confirmed there were sufficient distributable reserves before authorising the payment.

For every dividend payment, you must issue a dividend voucher to each shareholder receiving a distribution. This is a crucial tax (and legal) receipt that must be retained by both the company and shareholder.

Dividends are treated as taxable income for shareholders, so are part of your Self Assessment tax return. This is where the tax-efficiency of dividends truly shines, as they’re not subject to National Insurance Contributions (NICs) and dividend income is taxed at lower rates.

Here’s how personal dividend tax works:

Tax-free allowances - Every UK taxpayer is entitled to a personal allowance and a dividend allowance. 

Personal allowance (£12,570) - this is the amount of total income (salary, dividends, interest etc) you can earn tax-free

Dividend allowance (£500) - this is a separate allowance applied specifically to dividend income and is applied after your personal allowance has been used. The first £500 of dividends are tax-free regardless of your other income (although the amount does count towards your overall income tax band).

Any dividend income received above your available allowances are also taxed at special rates depending on your overall personal income tax band (view current rates here).

Now the final piece of the puzzle is strategy, and the question of how much profit do you want to keep in your business and how much should you take out? You must always weigh up the need for reinvesting profits (e.g. new equipment, hiring staff, marketing campaigns) with the desire to reward shareholders (or yourself if you’re the sole owner and shareholder). Reinvestment is vital for driving future growth and the company’s long-term value. However, rewarding yourself and any other shareholders for the risk and capital invested in the business is also important.

You also need to work out whether it is wise, and tax-efficient, to also draw a salary from the business. This split between salary and dividends can be complicated to work out, so it’s best to speak with your accountant to make sure you get this right.

Understanding and effectively managing dividends is fundamental to running a successful limited company in the UK. By balancing the need for reinvestment with the desire to reward shareholders, you secure your company’s long-term success and maximise your personal financial stability.

The core of successful dividend planning comes down to 3 things

Compliance - ensuring you always check your distributable reserves and follow correct procedures for declaring a dividend

Tax efficiency - strategically combining a salary and dividends in the most common and effective way to minimise your total income tax and NIC liability

Timing - drawing the right amount at the right time in the tax year is critical to maximising your personal tax-free allowances

Don’t leave your most important payment to chance, get the perfect balance

At Beany, we specialise in helping business owners like you navigate these complex rules. Our experts can review your current profit structure, ensure your documentation is accurate, and provide a tailored profit extraction strategy that keeps your tax bill as low as legally possible.

If you’re looking for a business accountant for your limited company, book a free consultation with our team.

Beany Resources delivered straight to your inbox.

Understanding dividends as a UK business owner

Financial literacy

A simple guide to understanding and managing your Director’s Loan Account.

FINANCIAL LITERACY  •  23 OCTOBER 2025  •  5 MIN READ

Learn how a Director’s Loan Account works, what an overdrawn balance means, and how to manage it to avoid HMRC tax and compliance issues.

Understanding your Director's Loan Account

The Director’s Loan Account (DLA) is a vital concept in business finance, yet it remains one of the most confusing, especially for new business owners. We hear the question often "my company made a profit and declared a salary, but where is the cash?"

It's a completely fair question. It can feel like you are your company sometimes, but the reality is that the company has its own legal status.

In its simplest form, the Director's Loan Account (DLA) is a record that tracks the movement of money between two separate legal entities: you (as a director) and your company. Think of it as a flexible loan account between you and the business.

This account becomes particularly important when there’s more than one director or shareholder, as it clearly defines who owes what i.e. whether the company owes money to you, or you owe money to the company.

Understanding the Director's Loan Account as a loan

When a company needs money, it essentially has 3 main ways to get it - from a bank, a third party or you (the director/shareholder).

The bank transfers the loan amount to the company’s operating account. The company owes money to the bank, shown as a Bank Loan on the Balance Sheet.

A third party transfers money to the company’s operating account. The company owes money to that individual/entity, shown as a Loan on the Balance Sheet.

You, as director of the company, deposit personal money into the company’s bank account (or pay for some company expenses personally). The company owes you that money. This is a liability on the Director's Loan Account, and also shows on the Balance Sheet.

How your Director's Loan Account works in practice

Ideally, your DLA should have a credit balance, meaning the company owes you money. This is the safest position to be in.

You'll usually see the 'Director's Loan Account' as a key line item on a company's Balance Sheet.

The movement in the Director's Loan Account is made up of two types of transactions - cash transactions and year-end accountant adjustments.

These are straightforward as they involve direct movement in the company’s bank account.

Increases to the DLA (company owes you): when you deposit personal money into the company (known as Funds Introduced or Cash Deposits), or when you pay for company expenses yourself (not with company funds or card).

Decreases to the DLA (you owe the company): when you withdraw money from the company for personal use, or when the company pays for your personal expenses (known as Drawings).

As accountants, we want to make sure you’re as tax efficient as possible, so at year-end we make adjustments to Director's Loan Accounts when preparing the company’s financial statements.

If the company declares a salary or dividend, this can offset any overdrawn balance. Salary is subject to PAYE and NI, while dividends are declared from post-tax profits and must be supported by sufficient retained earnings.

If you’ve covered company expenses personally, such as business mileage or use of your personal phone. Your accountant will record these as reimbursable amounts, increasing your DLA balance.

The risks of an overdrawn current account

If you take more money from the company than you put in, you will have an overdrawn DLA. This means you owe the balance to the company (essentially, the company has given you a loan).

An overdrawn account is almost always a warning sign of financial pressure. If your accountant says your DLA is overdrawn, please take it seriously and make time to understand what’s happening.

HMRC treats an overdrawn DLA as a director’s loan, with potential tax consequences if it’s not repaid promptly.

Interest on an overdrawn Director's Loan Account

If your DLA is overdrawn at your company’s year-end and not repaid within 9 months and 1 day, HMRC charges Section 455 Corporation Tax on the outstanding amount.

The current rate (as of 2025) is 33.75%, matching the higher dividend tax rate.

This tax is refundable once the loan is repaid but it can take time to recover.

Additionally, if the loan exceeds £10,000 and no (or low) interest is charged, HMRC may treat this as a benefit in kind with the following impacts:

You'll pay personal tax via your P11D, AND

The company will pay class 1A National Insurance on the benefit

An overdrawn DLA can also have legal consequences.

If the company becomes insolvent, the liquidator may require you to repay the overdrawn balance from your personal funds.

In serious cases, persistent overdrawn accounts can raise questions about a director’s fiduciary duties and responsible conduct.

If you find yourself with an overdrawn DLA, it's vital to address it quickly to avoid compounding interest charges and serious consequences. You have two primary ways to clear or reduce the balance:

Introduce Funds: The most straightforward way is for you to personally transfer money back into the company’s bank account. This acts as a cash repayment of the loan, immediately reducing the amount you owe.

If you’re due salary, dividends, or reimbursements, you can choose to offset these against your DLA balance rather than taking the cash.

Understanding your Director's Loan Account is essential for business management. Here are a few important things to remember.

It’s a tracker, not a cash account. It simply records what the company owes you (positive balance) or what you owe the company (negative balance).

Aim for a position where the company owes you. This is the safest position to be in rather than being overdrawn/in debt to the company

Act fast on a negative balance. If your DLA is overdrawn, address it promptly to avoid HMRC tax charges, benefit-in-kind implications, or personal liability.

Keeping these in mind ensures good financial governance, reduces tax risks and strengthens the financial health of your business.

Learn how short-term rental income is taxed in the UK, what expenses you can claim, and how to stay compliant.

TAX  •  30 SEPTEMBER 2025  •  4 MIN READ

Learn how Airbnb income is taxed in the UK, what expenses you can claim, and how to stay compliant with HMRC rules for short-term rental hosts.

UK Tax Guide for Airbnb & Short-Term Rentals

The rise of platforms like Airbnb has made it easier for people to earn income from renting out a spare room or a separate property. In the UK, this is often referred to as a "short-term rental" or "holiday let". If you're considering this, you need to understand the tax consequences.

*For the ease of reading, we’ll refer to this as Airbnb income for the rest of the article.

You must declare any property or self-employment income that exceeds £1,000 in a tax year. Your rental income, like any other income source, is subject to income tax. 

There are two main tax allowances that might apply to your Airbnb income:

Rent a Room Scheme: if you rent out a furnished room in your main residence, you can earn up to £7,500 per year tax-free under this scheme. This allowance is automatically applied if your gross receipts are less than the limit. If you jointly own the property with a spouse or civil partner, the allowance is split equally, meaning you can each earn up to £3,750 tax-free. If your rental income is higher than the allowance, you have a choice: either pay tax on your gross receipts over the allowance (with no expenses claimed) or pay tax on your actual profit (gross receipts minus expenses). You can't claim both the tax-free allowance and expenses.

Trading Allowance: this allowance is for individuals who rent a separate property that is not their main residence. It allows you to earn up to £1,000 in property income per tax year without having to declare it to HMRC. If your allowable expenses are less than £1,000 it is more tax-efficient to claim this allowance instead of your expenses.

You must register for Self Assessment and declare your earnings if your gross income from property is more than £1,000. The deadline to register is 5 October following the end of the tax year in which you first started earning rental income.

HMRC now receives income data directly from platforms like Airbnb, so they are aware of your earnings. It's crucial to be transparent and accurate when filing your return to avoid penalties.

You can reduce your taxable profit by deducting allowable rental expenses. These may include:

Utilities such as gas, electricity and water

Mortgage interest (since April 2020, relief is restricted to the basic rate of income tax, which is 20% tax credit).

While previously a beneficial tax regime, the Furnished Holiday Lettings (FHL) tax scheme has been abolished as of 6 April 2025. This means that the special tax treatments that applied to FHLs, such as full mortgage interest relief and certain Capital Gains Tax reliefs, are no longer available. From the 2025/26 tax year onwards, you will follow the same rules as other landlords when renting out property.

You must register for VAT if your taxable turnover for the last 12 months goes over the threshold of £90,000. If you have to register, you will need to charge VAT on your Airbnb income at the standard rate of 20%.

By using your property to derive income there can be other issues that need to be considered:

Council tax vs business rates: if you let a property on a commercial basis for short periods, it may be subject to business rates instead of council tax. To qualify for business rates, a property must be available for commercial letting for at least 140 days a year and actually let for at least 70 days.

Insurance: standard home and contents insurance may not cover short-term rentals. You may need to get specialist cover.

Buying and selling property: the way you use a property for short-term rentals can affect taxes like Stamp Duty and Capital Gains when you buy or sell.

Tax rules for short-term rentals can be complex and depend on your individual circumstances. Our advice, as always, is to speak to your accountant or tax advisor and get some direct information that is pertinent to your situation before listing your property for short-stay rental on Airbnb (or any other platform).

We’re an online accounting firm that believes in delivering big firm expertise without the big cost. Our team work from across the UK to help business owners with everything accounting, including annual accounts, bookkeeping, payroll, forecasts, financial reporting and more. If you're looking for an accountant for your business, get in touch or book a call with our team for a free consultation.

UK tax guide for short-term rentals like Airbnb

Making Tax Digital by HMRC is a government initiative aimed at making it easier for individuals and businesses to get their tax right and keep on top of their business affairs.

TAX  •  29 SEPTEMBER 2025  •  5 MIN READ

Making Tax Digital is a government initiative aimed at making it easier for individuals and businesses to get their tax right and keep on top of their business affairs.

Understanding Making Tax Digital

Making Tax Digital (MTD) is a government initiative aimed at making it easier for individuals and businesses to get their tax right and keep on top of their business affairs.

MTD involves more frequent information sharing with HMRC throughout the year, rather than a single tax return at the end of the year. 

MTD is already compulsory for businesses above the VAT registration threshold (£90,000). MTD for Income Tax will now be introduced in a phased approach starting from 6 April 2026, while a major policy reversal has seen MTD for Corporation Tax cancelled entirely.

HMRC’s rules for Making Tax Digital for VAT

How an accountant can help with Making Tax Digital 

Making Tax Digital for VAT is the most established part of the program, having been live since its initial introduction in 2019. It is now compulsory for all VAT-registered businesses, regardless of their taxable turnover, as of April 2022. This includes businesses that are voluntarily registered below the VAT threshold. As of 1 April 2024, the VAT registration threshold has also been updated, increasing from £85,000 to £90,000.

All VAT-registered businesses must now use HMRC-approved, MTD-compatible software to keep VAT records and file VAT returns. HMRC now automatically signs up new VAT-registered businesses for MTD for VAT, removing the need for a separate sign-up process.

MTD for VAT requires you to keep records digitally, including:

Invoices, recording the time and date of supply, the net value (excluding any VAT) and the VAT rate used.

The original plan to mandate MTD for Income Tax Self Assessment (ITSA) from 6 April 2024 was abandoned. Instead, HMRC has adopted a phased, tiered approach based on income levels.

From 6 April 2026: MTD for ITSA will become mandatory for self-employed individuals and landlords with an annual qualifying gross income exceeding £50,000. This threshold is determined by your gross income for the 2024/25 tax year.

From 6 April 2027: The rules will extend to those with an annual qualifying gross income of more than £30,000.

From April 2028: The government has set out plans to introduce legislation to extend the rules to those with a qualifying gross income above £20,000.

For MTD for income tax, taxpayers will need to:

Maintain digital records (business and/or property records)

Submit quarterly updates of your business's income and expenses to HMRC using MTD-compatible software.

Finalise your end-of-year tax position: This new system culminates in a two-step year-end process. The first step involves the submission of a Business Source Adjustable Summary (BSAS), where necessary tax and accounting adjustments are made. The second step is the Final Declaration, which brings together all income sources to finalise your tax position for the year.

A new points-based penalty system for late submissions will also go live with MTD for ITSA in April 2026. Each late quarterly submission will incur one penalty point, with a £200 fine being triggered after four points are accumulated. The payment deadlines for income tax remain the same as under the current Self Assessment system, due on 31 January and 31 July each year.

A major and unexpected development is the cancellation of MTD for Corporation Tax. While it was initially slated to be mandated from 2026, HMRC has now announced that it will no longer proceed with a compulsory digital reporting regime for corporations.

HMRC stated the decision was made due to the “diverse needs of the corporation tax population”. This signals a recognition of the complexities of the tax and suggests that future modernisation efforts for corporation tax will likely focus on a more tailored approach, rather than a “one-size-fits-all” digital strategy.

Making Tax Digital is an ever-evolving initiative, and it's your responsibility to ensure that you are ready for MTD and are compliant when it comes along. 

If you engage an accountant, such as Beany, they can take away this burden. It’s their job to keep on top of the MTD updates and requirements, and know what’s required and when. 

In short, Making Tax Digital (MTD) is a government initiative aimed at helping individuals and businesses get their tax right. HMRC estimates that billions of pounds are lost every year as a result of individuals and businesses not paying the right amount of tax and MTD is an initiative to address this.  

Will MTD mean lots of extra reporting to HMRC?

The frequency of reporting to HMRC will increase under MTD, however this is not necessarily a bad thing. More frequent reporting means that there is a need to keep more on top of your finances throughout the year, rather than leave it all to the last minute.

MTD is a great opportunity to get on top of your day to day bookkeeping, or engage an accountant to do this for you. This means that when it comes to reporting to HMRC you will already be most of the way there. 

A key benefit of MTD to you as an individual and business owner is that you will know throughout the year an estimate of your tax liability, which will be calculated based on the information you submit to HMRC. This will help you budget and save for your tax bill and will avoid any surprises come the end of the year. 

As mentioned above, MTD also means there will be less stress at year-end as you frantically try to collate all the information needed to submit your tax return, as you will have already reported this to HMRC and will have all the information stored in your MTD-compatible bookkeeping software. 

Do I need special software to be compliant with MTD?

Yes. MTD requires submission of information via MTD-compatible software. Xero is an example of bookkeeping software that is compatible for MTD for VAT and income tax. 

Here is a list of all software that is compatible with MTD for VAT.

Here is a list of al software that is compatible for MTD for income tax. 

HMRC do not provide free MTD software. If you’re unsure about what software to get then speak to your accountant or bookkeeper. 

MTD is compulsory for all VAT-registered businesses, regardless of their turnover. MTD for income tax will become compulsory from April 2026 for sole traders and landlords who meet the relevant income thresholds.

HMRC grants exemption from MTD if it’s not practical for you to use software to maintain digital records and submit data to HMRC. 

It may not be practical due to your age, disability, location, religion or another justifiable reason. 

You will need to explain your reason to HMRC and if an exemption is granted an alternative solution will be found. 

The best way to prepare is to begin using MTD-compatible software to keep digital reocrds of your business's finances.

Understanding Making Tax Digital (2025 update)

Go beyond annual accounts. Use management reports to track performance and make smarter decisions.

FINANCIAL LITERACY  •  14 AUGUST 2025  •  5 MIN READ

Go beyond annual accounts. Discover how regular management reports can help you track performance, improve cash flow, and make confident, data-driven decisions.

What are Management Accounts? Turn Your Data into Business Decisions

Many businesses only look at their financial position once a year, when the annual accounts are finalised. The problem? By then, the data is historical. Relying on this alone is like only getting a health check-up from your doctor once a year and receiving the results months later. The information is valuable, but not timely. A lot can change in a year and you can’t make choices based on old news.

Monthly or quarterly management accounts bridge the gap, giving you timely insights into performance so you can make decisions before opportunities pass or problems escalate. Think of them as your business’s regular health check-up that reviews the vital signs.

Management accounts bring together key financial data into a concise, decision-making tool. While every business’s management accounts will look slightly different depending on industry and goals, they often cover:

Profit and Loss statement - revenue, expenses and profitability

Balance sheet - assets, liabilities and equity snapshot

Cash flow statement - movement of cash in and out of the business, ensuring you have the funds to operate smoothly

Key Performance Indicators (KPIs) - metrics aligned to your goals, such as gross profit margin, customer acquisition cost, or revenue per employee

Variance analysis - where the magic happens, comparing actuals against budget or prior periods to answer the critical question ”are we on track?”

Understanding the key difference in how year-end and management accounts are used is a crucial part of running a business.

Annual accounts are essential for meeting tax obligations and local regulatory requirements but they are primarily historical records.

Management accounts focus on recent performance. They help you see trends, understand the drivers behind your numbers, and make adjustments while there’s time to influence outcomes.

Management accounts aren’t just about reporting numbers, they’re a strategic tool.

Informed decision-making - insights to guide growth, investments and costs

Improve cash flow management - anticipate shortages or surpluses before they impact operations

Spotting trends or problems early - identify rising costs, falling margins or seasonal changes and take corrective action

Stakeholder confidence - provides up-to-date information for investors, lenders, and partners

Tax planning - stay on top of obligations and optimise your tax position before year-end

Performance tracking - compare actual results against budgets or forecasts

The true value of management reports is in interpreting them. Clear analysis, relevant commentary and actionable recommendations are what turn the data into a useful roadmap.

At Beany, our accountants help you understand the story behind your numbers. We turn your financial data into a practical conversation, giving you confidence and clarity to make better decisions for your business.

If you’re already a client, get in touch with your accountant for further information on cost, reporting frequency and what metrics will be the best fit for your business and goals.

New to Beany? Book a free consultation to discuss your compliance accounting requirements and explore valuable add-on services like management reports.

Compliance or strategy? Understand the difference between financial and management reports.

One report is for tax authorities, the other is for you. We break down the key differences between financial statements and management reports for UK business owners.

Management Accounts vs Financial Statements: Key Differences & Benefits

Financial reports are a fundamental part of running a business. However, not all reports are created equal. The key to decision-making is understanding the difference between the official financial statements prepared after year-end and the timely management reports needed to steer your business on a day-to-day basis.

Understanding both is essential. Financial statements are like a car’s MOT certificate, proving it’s compliant and roadworthy. Management reports are like your car’s dashboard (speedometer and fuel gauge) that help you on your journey. One ensures compliance and reflects where you’ve been, the other provides the insight you need to decide where you’re going.

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