How to prepare Annual Accounts for Company Investments

If you invest through your limited company, then you need to report your annual accounts to HMRC. This is also known as annual bookkeeping or simply ‘books’. This guide shows what your accountant will need in order to prepare your accounts based on different investments such as shares, funds and property.

I’ve previously covered how to invest your company profits. In short, it’s a great way to build a passive income out of idle funds sitting in your business account.

However, running an investing company comes with the extra hassle of having to calculate your yearly profit & loss (P&L) and balance sheet. You need to file your annual accounts up to 9 months after your company financial year ends.

Despite the hassle, I have been doing it for 3 years and it’s totally worth it. At a high level, your accountant will need the following things for your company year:

  • Total income (interest/rent + dividends + realised capital gains/losses)
  • Opening and Closing Balance
  • Money In/Out
  • Unrealised Gain/Loss
  • Total Expenses
Annual accounts when investing through your limited company

I find it easier to report my profits per platform/investment rather than as a whole. I can provide more details and it’s easier for the accountant to spot any mistakes. This is the method I’m going to follow here too.

Annual accounts: A step-by-step example

Let’s follow an example. A company invests in three different things. Property loans, funds/shares and rental property. In fact, most investments are a subclass of those 3 types.

For each platform, we report how much money we made, what type of income it is (interest or dividends) and how much we moved in or out of the platform. So if we put everything in a short online spreadsheet it should look like this:

Annual accounts Excel spreadsheet when investing as a limited company
How to report Income and Expenses when investing as a limited company. 
Feel free to make your own copy (File -> Make a Copy).


That’s the backbone of our annual accounts reporting.

A) Property loans

Since this is a new investment, the opening balance is 0. We invested £50,000 into the platform for a nice £5,000 profit in interest payments. The interest was paid into our bank account, therefore, no retained earnings. And because the property loans keep going, the closing valuation will not change.

What do I pay tax on?

You will pay corporation tax on the £5,000 interest.

B) Funds/Shares platform

This is probably the hardest one to track because sometimes platforms do not report valuations on specific dates. They should be able to provide us with the portfolio balance for both the opening and closing days. But even if they don’t, I will show you how to calculate it yourself. I know Vanguard does if you call them up.

So in our example, our opening balance was £100,000 because we assume we were already investing there from previous years. We made a £30,000 contribution during the year. Our funds paid £10,000 in Dividends which is nice. We re-invested the dividends in the same fund, therefore, the Retained earnings figure is also £10,000. Meanwhile, we sold a fund £5,000 higher than we bought it which incurred taxable capital gains. Overall, £150,000 is our closing balance at the company year-end.

What do I pay tax on?

  • Fund sell: You made a £5,000 profit from the fund sell therefore you’ll pay corporation tax on that.
  • All dividends are tax-free. According to HMRC, the dividends received at the company level are exempt from corporation tax as long as the location of the fund/shares is in the UK or in one of this long country list.

Receiving dividends tax-free is a great benefit which is also the reason I’m investing with Property Partner as a limited company. They distribute the rent as dividends which is an advantage to both companies and individuals.

C) Rental Property

A rental property will pay you rent. Of course, there are property expenses such as mortgage costs and boiler repairs which will reduce your corporation tax. I report all expenses in the Expenses tab.

Our property was bought for £150,000 and we received £15,000 in rental income.

What will I pay tax on?

You will pay corporation tax on the rental income minus all expenses. Expenses can be agency costs, mortgage interest costs, finance costs etc. Note that if you own a property as an individual you can no longer deduct the mortgage interest payments from your gross profits. But as a company, you surely can. It’s important to specify what type of expense each one is. There is a difference between capital improvements and other costs.

Note: Usually, people own SPVs when investing in buy-to-lets. That’s one company (SPV) per property. The tax process though is the same.

D) Other Income

This category is for anything else not covered before, such as bank interest on cash (hardly any these days!).


Once you have reported all income, you need to report your expenses. I like to report expenses separate from income. That’s because some fees are taken directly from the bank account and others from inside each platform.

What matters for your annual accounts is to show the total expenses during your company year along with the type of expense. I have a separate “Expenses” tab on the Google Excel spreadsheet. Don’t ask for permission to edit mine, but make your own copy instead (File -> Make a Copy).

Expenses should be easy to track. It’s extremely important to go forensically through your business bank account and spot any unknown transactions. For example, I had forgotten I had transferred some money back to my personal bank account because I paid some company expenses using my personal card (also known as out-of-pocket expenses).

Fund expenses

It’s worth noting that I only report explicit expenses such as transaction costs and platform costs. I do not report the 0.3% fund expense that Vanguard automatically takes from my fund holdings.

Loan interest expense

If you’ve funded your investing company with a loan from your trading one, the loan interest counts as an expense. For example, 5% on a £100,000 loan is £5,000. See below for more.

Intercompany Loans

In case you have money coming in from another company, you need to report the balance. Your accountant will need the money moved in or out of your company. This is a simple figure as reported on the ‘Loans’ tab.

The loan interest acts as an expense in one company and a profit in the lending company. As a result, this should reduce your corporation tax on the investing company and will increase it on your trading company.

The net effect is the same so you’re not avoiding tax nor paying a higher tax bill. It’s just a more formal way of making intercompany loans.

How you will pay the interest is up to you. You can roll it up and pay it after 5 or 10 years together with the principal. Or you can pay it annually or even monthly which is more of a hassle.

If you had multiple loan payments into your company during the year, only the sum of the amount matters. Do not forget to report the Interest as an expense on the ‘Expenses’ tab.

Your accountant will also need the business banking opening and closing balance.

That’s it! The above details should be enough for your accountant to work out your taxes and prepare your annual accounts. Your accountant will send you the final accounts for you to review. These should be the long and abridged format together with a CT600 form. Then they will submit it to HMRC and you need to make a tax payment.

How to pay your corporation tax to HMRC

After your accountant has submitted the final accounts you will need to pay your corporation tax. Here’s how:

If this is your first company year, you will need to create a Government Gateway account. Once signed in, you need to order an “Activation Code” which will arrive in 5-7 working days by post. Then you enter your Activation Code into your account which will allow you to pay your tax online.

Assuming you now have a working Government Gateway account, you are ready to make an online payment. You can pay by card or by making a bank transfer.

Regardless of which option you choose, you will need your Corporation Tax Reference. A Corporation Tax Reference is very important because it is basically the payment reference HMRC needs when making the payment. This is a bit tricky because it changes depending on which year you’re paying for.

Inside your government gateway account
Your Government Gateway account

Note that when you log in to your Government Gateway, the UTR greyed out in my image above is NOT your Corporation Tax Reference. If you click on the View your Corporation Tax Statement link this will take you to the old-fashioned HMRC website which shows you your accounting periods.

How to find your corporation tax reference before filing your annual accounts for your investing limited company
Your corporation tax reference for the accounting period

Click on the accounting period for which you want to make a payment and you should see your balance due. Your Corporation Tax Reference should be right there. It’s a series of long digits followed by a letter. Mine is 16-digit long plus an “A”.

Please note it takes a few days until the amount shows up after your accountant files the accounts.

Now make a payment and use your Corporation Tax Reference, also known as Payslip reference as a reference.

The payment reference should match exactly your corporation tax reference. You cannot pay HMRC without the Corporation Tax Reference as they won’t know what the payment is for. Hopefully, you found the above straightforward! I know I was very confused the first year of doing it.

How to minimize your taxes

We’re not trying to evade any tax, just to minimize it.

As a limited company, there are a few things you can do to minimize your taxes when investing.

  • Focus on dividends because they are exempt from corporation tax

    When you have to choose between receiving dividends or interest, pick dividends. That’s not to say all investments should be paying high dividends, but it’s a nice benefit. This is why I’m investing in university accommodation which pays high rent in the form of dividends.

  • Pick your funds carefully

    Spend some time considering some long-term options. Switching between funds incurs capital gains taxes which will cost you money. Unrealised set-it-and-forget-it type of gains is one of the best tax optimization strategies.

  • Pick your platforms carefully

    This should go without saying but if you’re stuck in an expensive platform then you will have to sell your holdings before moving out. Many times this will cause a higher tax bill.

Pro tips when investing as a limited company

#1 Pro Tip: Avoid accumulation type funds, pick the income type

Morningstar Accumulation and Income funds

A lesson learnt after investing as a limited company is to avoid investing in accumulation type funds. Sometimes, funds and ETFs want to make our life easier by re-investing the dividends automatically for us. That’s great for an ISA or pension (SIPP) but not so great once you really want to know what your actual dividends are.

It’s slightly harder to separate the dividends received from the total gain. As a company, we need to be able to report on that because dividends are tax-free and gains from share appreciation are not!

Vanguard is actually pretty helpful in sending documents every 6 months that report your re-invested dividends number. However, not everyone invests with Vanguard directly. Usually, people invest in funds through platforms such as HL and Interactive Investors.

But don’t worry, usually all funds that come in accumulation mode come in income mode too. It’s much easier to receive the income as cash so you know exactly what you need to report. This will save you hours of unnecessary research.

#2 Pro tip: Keep a transaction log file

I like to keep an excel spreadsheet where I log the fund and shares transactions I make. I actually prefer to not automatically invest dividends such that I know exactly what I buy when. Keeping a transaction log file will massively help to calculate capital gains when you sell.

You can always search for your past trades in all share platforms. But it’s much better to have a handy view of all your previous transactions. It helps answer questions such as “How much tax do I have to pay if I want to sell everything?”.

You can also use Morningstar to track your portfolio holdings.

#3 Pro tip: How to calculate your portfolio balance for a specific day in the past

As we said above, we need to report the valuation also known as balance on both the opening and closing day of the company year. If a platform does not give you your balance at any point in time, then it’s easy-ish to calculate it yourself.

For each fund in your holding, you need to know the number of shares you hold, also known as quantity. Even if it’s a fund, you should own a number of fund shares. Once you have this amount, simply find the “Historical price” for the day in question. For example, 85.5 shares x 5,812.00 pp = £4,969.26.

I like to use the Financial Times markets for finding historical fund prices as it’s nice and simple. For example, to find our holding balance for the iShares MSCI World GBP Hedged ETF, go to the Historical tab and pick your date. Now multiply the Close price x your quantity to find your actual value.

FT Historical prices for funds
Financial times markets – How to find historical fund prices

#4 Keep it very simple

Preparing annual accounts will give you enough headache. Therefore try to minimize your time spent on it by picking only a few platforms. The more platforms you have the harder it becomes to manage it all. Trust me, I made my mistakes on this one! I consider this to be the most important tip.

Last but not least, do not confuse the company tax year with the personal tax year. The company year can be anything depending on when you started trading. The personal tax year is the classic April-to-April period.

Annual accounts for your investment company: Final Thoughts

Nobody said preparing annual accounts for an investing limited company is easy. I know that the complexity may put you off but consider this: If you make £10,000 and spend 5 hours a year preparing your annual accounts, that’s £2,000 per hour. Is it worth doing it now? The benefits are great and the more you invest the higher the amount should be.

The time you spend preparing your annual accounts is a fixed cost. The gains, on the other hand, scale with the amount invested.

Hopefully, this article will help both accountants and clients work with a common template for filing annual accounts.

Happy investing 🙂

Disclaimer: I am not an accountant by any means. I just like to dig deeper and understand how things work under the hood. You should not rely on this guide for tax advice and you should always seek tax advice from a professional. I am not liable for any damage or losses. As always, do your own research.

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25 thoughts on “How to prepare Annual Accounts for Company Investments”

  1. First! Great artical as always Michael!
    I am following your company structure and I am due to file my fist company accounts in January and this is a great time to start prepping the data for it. I have some money invested in P2P were I stash the VAT and the Corporation Tax due of my trading company. Is the treatment of P2P investment earning any different than Funds/Shares? In suppose a CGT will be due when I am getting money out of a platform to repay back to the trading company, similar to selling a fund.
    I have followed the FvL approach to investing in a margin account with Interactive Brokers. Initially I’ve opened an accouint with II, but after they hiked their fees for business accounts I decided to switch over and so far it has been great. I suppose the margin loan interest can be counted as a expense as well.

    • Glad this comes timely Atanas! The P2P earnings should be subject to corporation tax as usual. I do invest with Zopa through my limited company and pay taxes on the profits. Not impressed though.

      How is Interactive Brokers? Do they have the popular funds or is it just for trading? I want to switch from II, the fees are just too high! As you also pointed out, I believe the margin loan interest can be expensed.

      • IB seems to be a pretty solid platform and they are quite big in the US. Even though their trading software seems a bit dated I don’t mind as I definately don’t day trade. They don’t offer any index funds, however, I was able to replicate my portfolio’s Vanguard and Blackrock funds with their ETF conterparts. The ETFs have similar and in some cases even lower OCF than their indexed versions. The ones I am using are:
        Invesco EQQQ Nasdaq-100 UCITS ETF Dist
        Vanguard FTSE North America UCITS ETF
        Vanguard FTSE Emerging Markets UCITS ETF
        iShares MSCI World Small Cap UCITS
        iShares Developed Markets Property Yield UCITS
        Vanguard Global Value Factor UCITS ETF
        FTSE Developed Asia Pacific ex Japan UCITS ETF
        Vanguard FTSE Developed Europe ex UK UCITS ETF
        Vanguard FTSE 250 UCITS ETF
        Vanguard U.K. Gilt UCITS ETF
        iShares £ Index-Linked Gilts UCITS ETF

        I was pleasantly surprised by the IB pricing structure. Their tiered traduing fee starts from 0.050% min GBP1.00 per trade for up to 40K monthly trading volume. Monthly Activity Fee = 0 if monthly commissions are equal to or greater than USD 10. My portfoio is with 10 funds so there’s no inactivity/platform, only trading fees (approx. GBP120 per year).

        As far the margin loan is concern their blended interest rate for up to GBP80K is currently 2.047% which is in line with the rate of inflation and being tax deductable, basically makes its a 0% or sub-0% loan :-). I don’t want to test the limits of their margin requirements so I will only use 15-20% leverage, but only after the market drops a little bit.

        • The P2P platforms I predominately invest are Assetz Captital and Growth Street. So far I have a positive experiance with them and returns around 6-7% for short (1 month) to medium duration (up to 3 monts) loans. The liquidity is quite high and I haven’t been late paying my VAT bill yet 🙂 It’s a bit more involved than index investing, however, it’s worth while the effort to squize some extra returns from the otherwhile idle Corporation and VAT cash stashes.

    • Thanks for the reminder on Distribution shares rather than Accumulation Foxy. I do this for personal accounts, as dividends are taxed differently there, but had neglected to take the taxation of dividends into account for business accounts

      Sorry to digress, I too think it’s a great article, but I was interested in Atanas experience of Interactive Brokers. I am aware the trading commissions for US shares are literally pennies (as low as 20p a trade) with IB and currency conversion at spot rates for $2 per conversion. Even GBP ETFs are only £6 per trade. This compares to £12 per trade with H&L or £1.50 for regular investment, plus currency conversion averaging 0.7%.

      What does FvL stand for?
      How do you find IB compared to other brokers that allow business accounts (H&L and Interactive Investor were the ones I know of)?
      Was it easy to open from the UK and in a business name?
      Are you impacted by the Monthly Activity Fee ($10/m minus monthly trading commissions paid) for balances under $100,000?

  2. Great article! Just wondering whether the following statement doesn’t violate the arm’s-length principle as I doubt that you can roll up interests on commercial loans terms?

    “How you will pay the interest is up to you. You can roll it up and pay it after 5 or 10 years together with the principal. Or you can pay it annually or even monthly, which is more of a hassle.”

  3. Happy New Year to you Michael and thank you so much for another enlightening read!

    I am hopefully about to take the plunge and follow your route to investing with Vanguard through a secondary investment company using a 100k loan provided by my trading company (just a bit nervous with timing my entry in an already over-ripened bull market!)

    However if you don’t mind I would just like to pick your brains on a couple of things:

    – Can I just check if you would still recommend using the LifeStrategy funds in this strategy or whether the Vanguard FTSE Global All Cap (Equities) & Vanguard Global Short-term Bond Index Fund (Bonds) would be your recommendation following your comments in your post ‘Fi: Getting Real Now’ that having your time again these would be the only funds you would go with.

    – In terms of re-investing ‘Income’ class dividends as opposed to ‘Accumulation’, I understand that with Vanguard there is no online portfolio management portal so it a case of calling/email/posting to let them know how/when you want to re-invest?

    – Additionally for ‘Income’ class on bond interest would this not be classified as ‘Realised’ income when it arrives as cash in my Vanguard account before re-investment and subject to taxation in that years accounts? or would it only be if I withdrew it from the Vanguard platform that is would be considered ‘realised’?

    Your take on the above would be greatly appreciated and thank you again for your excellent blog.

    Best regards,


    • Happy new year to you Lyle too 🙂 I hear you about the 10-year long bull market! If you’re stressed just go with a more conservative approach. To answer your questions:

      I still recommend both the Vanguard LifeStrategy fund as well as the FTSE Global all-cap/Short-term bond options. In terms of equities, the latter does a better job reflecting the exact weights of countries/indices according to their market capitalization. The LS invests more in the UK, which can go both ways but has probably a better hedge against currency risk. The bonds part has differences too but not substantial. LS has a higher average maturity (8.7 years if I remember right). However, I don’t expect any big differences between the two options.

      Ultimately, what will determine your investment returns is the allocation between stocks and bonds and not the flavour of the global tracker. This is the most important bit to get right. To capture the returns without panic-selling when equities fall.

      Investing with Vanguard (directly) happens only through the phone for now. Call them and they’ll explain the process.

      I have not invested in any ‘Income’ class yet, only ‘Accumulation’. The interest is subject to corporation tax the year it’s received. I am not sure if Vanguard allows you to have cash in their platform. But in any case, there is no difference in how the tax should be paid. You still need to pay tax whether you re-invest or not, or withdraw it from the platform. Just remember that dividends are exempt from corporation tax.

      Oh and I believe Vanguard directly has a minimum of £100k per fund, so if you invest in 2 funds, that’s £200k right there 😉

      Hope the above helps!

  4. Hi Michael

    A very helpful article as ever. Why do you not charge the fund expense as I would have through this was an allowable expense. Have you had HMRC advice that this is not permissible?


    • Hi Gianni,

      This is a good question. I believe you can claim the fund expense but then you’ll have to report the gross amount (before the fee that is) when you sell. The problem with claiming the fund expense is that it’s usually implicitly charged by the fund manager and deducted from the fund price, rather than explicitly charged to us. Although the platform broker should tell you the actual fee amount, it makes things slightly harder.

  5. Hey Michael!
    Such a useful article, well done!

    I was just wondering about a couple of things:
    – Is there any benefit in paying interest on the intercompany loan? The only benefit I can think of is that, in your trading company you can offset the interest against any expenses that you occur in order to minimize your CT bill, which can be useful if your company is not really trading, but still pays some expenses (like accountant).
    – You are saying that all dividends are tax-free, depending on the location of the fund/shares. For funds, does that depend on the fund domicile country or the countries of the actual shares? For example if you get a dividend payment from VWRL, is that tax free?

    Thanks and regards!

    • Martin, the interest on intercompany loans is about making things proper. All loans between companies need to have an interest (aka commercial interest) between the borrower and the lender. Technically, I’ve heard that if the director of the two companies is the same, then you can get away with zero-interest loans but I’m not sure if this strategy is worth pursuing.

      There are zero benefits when charging interest in terms of saving corporation tax. One company’s income is the other company’s expense, therefore the CT overall gain/loss is zero if you own both companies.

      Dividends are tax-free as long as the fund’s domicile country is in the list. I wouldn’t worry about the fund’s shares as this is already taken care of by the fund provider (they pay taxes too). The VWRL is domiciled in Ireland so dividends should be tax-free.

  6. Dear Michael,

    Great post as usual and really helpful. I have been reading around this topic a lot and speaking with tax advisors regarding re-structuring my company(ies) and I am settling in on holding companies model where the trading company will issue dividends (not loans) to the holding company and holding company can pass dividends to the property SPV and Investment Company. I am meeting with them in the coming weeks and will let you know if anything useful comes out of that meeting and research.

    In the meantime, I have one question regarding capital tax on investments.

    According to a post on Vanguard page, aimed at personal investors, they note the following

    “Consider an all-in-one fund

    Investors in multi-asset funds such as our LifeStrategy funds are not liable to CGT on any gains made when the fund itself sells holdings, because this is the fund trading rather than you. There may be tax costs in other countries, which are paid out of the ongoing charges figure or OCF. However, you may be liable to CGT on any gains when you sell your shares in the fund, after taking your annual allowance into account.”

    In your post above, the bullet point, pick your funds carefully, appears to be in line with this. However, I am little confused as to why the income funds are better than accumulation funds as an accumulation fund, as long as the no income is withdrawn, should not be liable to any tax. Should there be still a tax if any dividends from a fund are automatically reinvested in the same fund? Thank you

    • Hi Peter, good idea on holding company if you want your profits invested in multiple companies.

      When a company invests in an accumulation fund, there is really no difference in terms of how the tax is treated. You will have to pay the tax regardless (if tax is applicable). The only difference is that accumulation funds automatically re-invest the payout automatically without you having to do any work. Income funds just pay it into your broker’s account.

      The only reason I recommend holding income funds than accumulation funds when investing as an LTD company is the easier bookkeeping. It’s much simpler to see how much money an income fund paid out if you need to pay tax on it. Hope that explains it!

  7. Dear Michael

    Great post I am 18 and have a six figure salary and around 100k cash. I regularly invest and have maxed out my isa. I save around 10k a month. Is it viable for me to open an LTD to buy stocks and shares through. How can I make sure I am not classified as a CIC. My dividend yield is around 3%. I invest in blue chips companies with good balance sheets growing or stable dividends and I try to aim for good p/e ratios. I have spoken to a few accountant s but to be honest they haven’t really taken me seriously due to my age or have no experience or knowledge in the subject. I would be investing around 8k a month. I am really trying to use this to build my net worth into the millions and I am quite frugal. I would lend my ltd money to use to invest in stocks and bonds/etfs. Would this be a viable option.

    Thanks in advance

  8. Has anybody used an online service to file the documents for their investment company? For my trading company I use HMRC’s online tool but it doesn’t support investment companies. I’m comfortable calculating the numbers myself so I’d rather not pay hundreds of pounds to an accountant or expensive bookkeeping system!

    • I’m in the same boat Jonathan. Although I find the accountant reassuring, especially when dealing with high sums, I’d love to be able to do it on my own. HMRC’s online tool doesn’t support it yet and they want you to file using 3rd party software.

      • I used fTax in the end. I’m not sure I’d particularly recommend it, but sadly there don’t seem to be many options available! It’s very clunky and I ended up having to manually edit the XML files before it sent them in order to cope with my first accounting period being longer than 12 months (as is perfectly normal for new companies!). But I managed to get it to work eventually and at least it only cost £75.

  9. Guys, as an alternative to creating a second company for investments, could you please let me know why would you not invest via your personal spread betting accounts which are tax free, compared to paying Corporate tax from the company?
    There is the legal option that you could take a loan from your company as long as you return it by April 4th each year and of course you can take it back on 6th of April again as long as you return it by the next year end, fully legally. Please let me know what your thoughts are spread betting wise?
    Do you know if for spread betting you need to provide information on your personal tax return as I am not sure since it is not taxable income?

    Great thanks for any information from Michael, Atanas and the rest, it could help us all optimise our investments!


    • Chris, if you take a director’s loan more than £10,000 then that’s a benefit in kind and you have to pay tax on it. It must be reported on the director’s self-assessment tax return and will be liable for Class 1 National Insurance deductions and the relevant rates of personal tax.

      That’s a big limitation. Also, the April 4th/6th dates you used are not correct. The personal tax year has nothing to do with the director’s loan period, it’s the corporation tax accounting period that matters (so totally depends on your company).

      Spread betting is not my area of expertise.


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Hi! I’m Michael and I love writing about different ways to earn, save and invest our money. Coffee addict :)

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