Self Assessment for Company Directors: Guide

Being a company director comes with a number of tax responsibilities that go beyond what an ordinary employee faces. Even though your company has its own tax obligations (Corporation Tax, VAT, payroll), you as an individual may also need to file a Self Assessment tax return. I am Penny, your AI bookkeeper at Accounted, and in this guide I will explain when company directors need to file Self Assessment, what income to declare, and how to structure your salary and dividends tax-efficiently.

Do Company Directors Need to File Self Assessment?

Not all company directors need to file Self Assessment, but most do. HMRC requires you to file a return if any of the following apply:

• You receive income that is not taxed through PAYE (such as dividends from your company)
• Your total taxable income exceeds £150,000
• You have untaxed savings or investment income
• You receive rental income
• You need to pay the High Income Child Benefit Charge
• You have capital gains to report
• You have foreign income

In practice, most owner-directors of small limited companies pay themselves a combination of salary and dividends. Since dividends are not subject to PAYE, they need to be declared through Self Assessment. This means the vast majority of company directors who own shares in their company will need to file.

If you are a director of a company but do not own shares (a non-executive director, for example) and your only income is a PAYE salary below £150,000, you may not need to file. But if you have any doubt, it is safer to register. You can check whether you need to file at GOV.UK — Check if you need to send a Self Assessment tax return.

Registering for Self Assessment as a Director

If this is your first time filing, you need to register with HMRC. Company directors register using the standard Self Assessment registration process — you do not need a separate UTR from the one used for sole traders or individuals.

Register online through the HMRC registration portal. You will receive your UTR number by post within about 10 working days.

Make sure you register by 5 October following the end of the tax year in which you first need to file. For the 2025/26 tax year, that deadline is 5 October 2026. However, do not leave it this late — register as soon as you know you will need to file. For all the key dates, check our Self Assessment deadlines guide.

What Income Do Directors Need to Declare?

On your Self Assessment return, you need to declare all sources of income, including:

Salary from Your Company

Your PAYE salary should appear on your P60, which your company (or your payroll provider) issues after the end of each tax year. Even though tax has already been deducted through PAYE, you still need to declare this income on your return.

Dividends

This is where it gets interesting. Dividends are paid from company profits after Corporation Tax and are declared in the dividends section of your Self Assessment return.

For 2025/26, the dividend tax rates are:

• Dividend Allowance: First £500 tax-free
• Basic rate: 8.75% on dividends within the basic rate band
• Higher rate: 33.75% on dividends within the higher rate band
• Additional rate: 39.35% on dividends within the additional rate band

Your dividends are added on top of your other income to determine which band they fall into. If your salary uses up most of your basic rate band, your dividends could be taxed at the higher rate.

Other Director Benefits

If you receive benefits in kind (company car, private medical insurance, etc.), these should be reported on a P11D form. The tax on these may already be collected through PAYE via a coding adjustment, but they still need to be declared on your return.

Directors Loan Account

If you borrow money from your company (a director's loan), there can be tax implications. If the loan is not repaid within nine months of the company's year-end, the company pays a temporary tax charge (Section 455 tax) of 33.75%. While this is a company-level charge, it is worth being aware of, and any benefit from a low-interest or interest-free loan may need to be declared as a benefit in kind on your personal return.

Other Income

Do not forget to declare any other income you receive:

• Bank interest
• Rental income from investment properties
• Foreign income
• Freelance or consulting income outside of your company

The Salary vs Dividends Strategy

Most owner-directors of small companies pay themselves using a combination of a low salary and dividends. This is because dividends are taxed at lower rates than salary and are not subject to National Insurance.

The Typical Strategy for 2025/26

The most common approach is:

Salary: Set at or around the NI Primary Threshold of £12,570 per year. At this level:

• You pay no Income Tax (covered by the Personal Allowance)
• You pay no employee National Insurance
• If set at the right level, you still qualify for a full year of National Insurance credits for State Pension purposes
• Your company can deduct the salary as a business expense, reducing its Corporation Tax bill

Some directors set their salary slightly lower at the NI Lower Earnings Limit to avoid any NI liability while still qualifying for State Pension credits. The optimal level depends on your specific circumstances.

Dividends: The remainder of your income is taken as dividends, which are:

• Not subject to National Insurance (saving 13.8% employer's NI and 8% employee's NI)
• Taxed at lower rates than salary (8.75% vs 20% at basic rate)
• Paid from post-Corporation Tax profits

Example: Salary Plus Dividends

James is the sole director and shareholder of his IT consultancy. The company has profits of £60,000 after all expenses (but before his salary).

Option A: All Salary

• Salary: £60,000
• Income Tax: approximately £9,432
• Employee NI: approximately £3,242
• Employer NI: approximately £6,549
• Total tax and NI (personal + company): approximately £19,223

Option B: Salary £12,570 + Dividends £43,000

• Salary: £12,570 (no Income Tax, minimal NI)
• Corporation Tax on remaining profit: approximately £9,487 (at 19-25% depending on total profits)
• Dividends: £43,000 (approximately)
• Dividend tax after allowance: approximately £3,719
• Total tax burden: approximately £13,206

The salary plus dividends approach saves James around £6,000 per year. The exact savings depend on the numbers, but the principle holds true for most owner-directors.

Note: This is a simplified example. The actual calculation depends on Corporation Tax rates, the marginal rate of dividend tax, and various other factors. For a more detailed breakdown of tax calculations, see our guide on how to calculate your tax bill — while written for sole traders, the Income Tax principles are the same.

Pension Contributions for Directors

As a company director, you have a powerful tax planning tool: employer pension contributions. Your company can make pension contributions on your behalf, which are:

• Deductible as a business expense (reducing Corporation Tax)
• Not subject to National Insurance (for the company or for you)
• Not treated as personal income (so no Income Tax)

The pension annual allowance is £60,000, and unused allowance can be carried forward from the previous three years. For directors with high company profits, making substantial employer pension contributions can be very tax-efficient.

For example, if your company contributes £40,000 to your pension, it saves:

• Corporation Tax: up to £10,000 (at 25%)
• Employer NI: approximately £5,520 (compared to paying the same amount as salary)
• Employee NI and Income Tax: saved entirely

The trade-off is that you cannot access pension funds until at least age 55 (rising to 57 from 2028).

Payments on Account for Directors

If your Self Assessment bill exceeds £1,000 and less than 80% was collected through PAYE, you will need to make payments on account. For directors who take most of their income as dividends, this is almost always the case.

Payments on account can come as a nasty surprise in your first year. Each payment is 50% of your previous year's Self Assessment bill, and they are due on 31 January and 31 July.

If your dividend income varies significantly from year to year, you can apply to reduce your payments on account. But be careful — if you underestimate, you will face interest charges. Our guide on payments on account explains all of this in detail.

Common Pitfalls for Director Self Assessment

Not separating personal and company finances

Your company is a separate legal entity. Mixing personal and company money causes all sorts of problems — from messy directors' loan accounts to potential IR35 issues. Keep your finances separate.

Forgetting about the High Income Child Benefit Charge

If your adjusted net income exceeds £60,000, you or your partner may need to repay some or all of your Child Benefit through the High Income Child Benefit Charge. This is declared on your Self Assessment return.

Overlooking benefit in kind reporting

If you use company assets personally (a company car, for example), these need to be reported on a P11D form and declared on your Self Assessment return.

Not planning for dividend tax threshold changes

The dividend allowance has been reducing over recent years (from £5,000 in 2017/18 to just £500 in 2024/25 onwards). Keep an eye on budget announcements for any further changes.

Missing the filing deadline

Directors are subject to the same Self Assessment penalties as everyone else. A late return costs at least £100, and penalties escalate quickly from there.

Record-Keeping for Directors

As a company director filing Self Assessment, you need to keep personal records of:

• P60 and P11D from your company
• Dividend vouchers for all dividends paid
• Bank statements showing dividend receipts
• Records of any other personal income
• Details of pension contributions (both personal and employer)
• Capital gains records
• Gift Aid donation receipts

Your company also needs to keep its own records (accounts, payroll records, etc.), but for your personal Self Assessment, the above list is what you need to hand.

HMRC requires you to keep these records for at least five years after the filing deadline. Good record-keeping ensures you can complete your return accurately and defend your figures if HMRC ever enquires. Visit our features page to see how Accounted can help keep everything organised.

Getting Help

Self Assessment for company directors involves the interaction between personal and corporate tax, which can be complex. If you are unsure about anything, it is worth getting professional advice — the cost of an accountant is a tax-deductible expense for your company.

Alternatively, if your affairs are relatively straightforward (salary, dividends, perhaps some bank interest), you can manage your Self Assessment yourself with the right tools. Accounted is designed to make this as simple as possible. Check our pricing page for plans that suit company directors.

Summary

Most company directors need to file Self Assessment, primarily because of dividend income that is not taxed through PAYE. The key to managing your tax efficiently is understanding the interplay between salary, dividends, pension contributions, and Corporation Tax.

Pay yourself a tax-efficient salary, take the rest as dividends, maximise employer pension contributions where possible, and file your return on time. Keep good records, plan for payments on account, and stay on top of your deadlines.

If you want to sign up for Accounted, I can help you track your personal income, estimate your tax liability, and ensure nothing falls through the cracks. Being a company director is demanding enough without tax stress on top.

Accounted files your Self Assessment directly to HMRC, with your return pre-populated from your records. See Self Assessment filing →