How to Resign as a Director of a Limited Company

At Towerstone Accountants we provide specialist limited company accountancy services for directors and owner managed businesses across the UK. We created this webpage for people running a company who want clear answers on tax, payroll, Companies House duties, and day to day compliance without jargon. Our aim is to help you understand your responsibilities, reduce the risk of penalties, and know when to get professional support.

Resigning as a director of a limited company is a significant step, and in my experience it is rarely taken lightly. Sometimes it is part of a planned exit, sometimes it follows a disagreement, and sometimes it is simply because your circumstances have changed and you no longer want the responsibility. Whatever the reason, it is important to resign properly. Doing it informally or incorrectly can leave you exposed to ongoing legal and tax responsibilities long after you thought you had stepped away.

In this article I am going to explain how to resign as a director of a limited company in the UK, step by step, covering the legal process, what paperwork is required, what happens at Companies House, how HMRC is affected, and the practical and financial issues you should think about before and after resigning. I am writing this as a chartered accountant who regularly advises directors at all stages of their involvement with companies, and everything here reflects real world UK practice rather than theory.

What it means to resign as a director

Resigning as a director means you are stepping down from your role as an officer of the company. You are no longer responsible for managing the business, making decisions, or ensuring compliance going forward.

However, resignation does not automatically remove all responsibility for the past. As a director, you are responsible for decisions and actions taken while you were in office, and that responsibility does not disappear simply because you resign.

This distinction is important, and I will return to it later in the article.

Check the company’s articles of association first

Before doing anything else, you should check the company’s articles of association. These are the rules that govern how the company operates, including how directors are appointed and removed.

Most standard articles allow a director to resign by giving written notice to the company, but some bespoke articles include additional requirements, such as:

• Minimum notice periods
• Board approval
• Specific wording for resignation notices

Ignoring the articles can invalidate the resignation or create disputes later, so this step should not be skipped.

Consider your wider position before resigning

Resigning as a director is not just an administrative act. Before submitting your resignation, you should consider your wider position carefully.

Key questions to think about include:

• Are you also a shareholder
• Do you have an outstanding director’s loan account
• Have you given personal guarantees
• Are there ongoing disputes or financial issues
• Is the company solvent

Resigning without addressing these points can leave you with unresolved risks or financial exposure.

Prepare a formal resignation letter

A director’s resignation should always be documented in writing. This protects both you and the company by creating a clear record of when the resignation took effect.

A resignation letter should include:

• Your full name
• The company name and number
• A clear statement that you are resigning as a director
• The effective date of resignation
• Your signature and the date

The wording does not need to be complex, but it should be unambiguous. Vague or informal messages can cause confusion later.

Decide the effective date of resignation

You can resign with immediate effect, or you can specify a future date. The effective date matters because it determines when your responsibilities as a director end.

For example:

• If you resign on 30 June, you are responsible up to that date
• Anything that happens after that date is not your responsibility as a director

Make sure the date is clear and agreed, particularly if there are other directors involved.

Notify the company and the board

Your resignation letter should be delivered to the company, usually to the company secretary or another director. In many cases, the resignation will also be noted in board minutes.

This internal step is important, because Companies House filings should reflect what has actually happened within the company.

Update Companies House

Once you resign, the company must notify Companies House. This is done by filing a form TM01, which records the termination of a director’s appointment.

The form includes:

• Your name
• The company details
• Your date of resignation

This filing is usually done online and should be submitted promptly. While it is the company’s responsibility to file the form, you should always check that it has been done.

I regularly see situations where a director believes they have resigned, but Companies House records still show them as active years later because the form was never filed.

Why checking the Companies House record matters

Companies House is the public record. Banks, lenders, suppliers, and HMRC all rely on it.

If you are still shown as a director:

• You may appear responsible for the company
• Credit checks may still link you to the business
• You may be contacted by HMRC or creditors

Always check the public record after resigning and follow up if it is incorrect.

Inform HMRC where relevant

There is no single HMRC form to resign as a director, but HMRC does need to be aware of changes in practice.

You should consider:

• Stopping payroll if you were paid as a director
• Updating PAYE records
• Ensuring your final payslip and P45 are issued

If you were the main point of contact with HMRC, it is sensible to ensure someone else is appointed.

What happens if you are the only director

If you are the sole director, you cannot simply resign and leave the company without a director, unless the company’s articles specifically allow it, which is rare.

In most cases, you will need to:

• Appoint a new director before resigning, or
• Close the company properly

Resigning without arranging this can leave the company in breach of its legal requirements.

Resigning as a director but remaining a shareholder

Many people assume that resigning as a director also removes them from ownership, but these are separate roles.

You can:

• Resign as a director
• Remain a shareholder
• Continue to receive dividends if declared

If you want to exit completely, you will need to deal with your shares separately, either by selling or transferring them.

What happens to your shares

If you hold shares, resigning as a director does not affect them.

Options include:

• Keeping the shares
• Selling them to other shareholders
• Transferring them
• Having the company buy them back

Each option has legal and tax implications, and this is often the most complex part of stepping away from a business.

Director’s loan accounts and money owed

If you owe money to the company, or the company owes money to you, this does not disappear when you resign.

Director’s loan accounts must still be settled.

This may involve:

• Repaying amounts you owe
• Agreeing repayment terms
• Receiving repayment of amounts owed to you

Leaving this unresolved is a common mistake.

Personal guarantees and liabilities

If you have given personal guarantees, for example on loans or leases, resigning as a director does not automatically release you.

You remain liable until:

• The guarantee is released by the lender, or
• The obligation is repaid

This is a critical point and often overlooked.

Resigning when the company is in financial difficulty

If the company is insolvent or close to insolvency, resigning as a director requires particular care.

Directors have duties to creditors in these situations, and resigning does not remove responsibility for decisions made during the period of financial difficulty.

In some cases, resigning at the wrong time can attract scrutiny, particularly if it appears to avoid responsibility.

Professional advice is strongly recommended in these circumstances.

What responsibilities remain after resignation

After you resign, you are no longer responsible for ongoing management or compliance, but you can still be held accountable for:

• Decisions made while you were a director
• Breaches of duty during your tenure
• Incorrect filings made while you were in office

This is why resigning does not mean walking away from the past.

Common mistakes I see when directors resign

The most common problems I encounter include:

• Failing to file the resignation at Companies House
• Assuming resignation removes all liability
• Leaving director loan accounts unresolved
• Not dealing with shares
• Ignoring personal guarantees

Most of these issues arise from misunderstanding rather than intention.

Practical steps after resignation

Once you have resigned, there are a few practical steps worth taking.

These include:

• Checking Companies House records
• Keeping a copy of your resignation letter
• Updating banks and professional advisers
• Ensuring payroll records are correct
• Reviewing your personal tax position

These steps help draw a clean line.

Tax implications of resigning

Resigning as a director does not in itself trigger tax, but related actions might.

For example:

• Final salary payments
• Benefits in kind
• Share disposals
• Loan repayments

Each of these can have tax consequences and should be considered carefully.

Do you need professional advice

Some resignations are straightforward, particularly where the company is healthy and relationships are amicable. Others are complex and risky.

You should strongly consider advice if:

• There is disagreement between directors
• The company has financial problems
• Significant sums are involved
• Shares are being transferred
• Guarantees exist

The cost of advice is often far lower than the cost of getting it wrong.

Final thoughts

Resigning as a director of a limited company is more than just stepping away from day to day involvement. It is a legal process that needs to be handled properly to protect you now and in the future. While the mechanics of resignation are relatively simple, the surrounding issues, such as shares, loans, guarantees, and past responsibilities, are where most problems arise.

Taking the time to resign correctly, document everything, and deal with the wider implications will give you clarity and peace of mind, and allow you to move on confidently to whatever comes next.

You may also find our guidance on what happens when a director resigns from a limited company and what records does a limited company need to keep helpful when exploring related limited company questions. For a broader overview of running and managing a company, you can visit our limited company hub.