As a limited company owner or director, in addition to meeting your company’s tax obligations, you may also need to register for and pay self-assessment tax on your income. Getting on top of your self-assessment tax obligations is essential to ensure that your personal tax liabilities are reported accurately to HMRC and by the deadline required. In this guide, we will provide an overview of self-assessment tax for limited company owners and directors, including how to register for self assessment and file a personal tax return.
What is self assessment in the UK?
Self assessment is one of two ways that HM Revenue and Customs (HMRC) in the UK collects personal income tax from individuals; the other is Pay As You Earn (PAYE). Self-assessment differs from PAYE because the latter is managed on behalf of employees by employers who take the responsibility of ensuring that the income tax is deducted “at source” and paid to HMRC. With self assessment, this process is the responsibility of the employee.
Most company directors pay themselves a relatively small salary under the personal tax allowance (£12,570 for the 2023/24 tax year). This ensures that they can continue to qualify for a state pension. Many company directors then top up their salaries with company dividends, which are taxed at a lower rate.
Who should register for self assessment tax?
Self assessment is used by those with more complex tax affairs, including business owners. You will need to register for self assessment with HMRC if you are:
- Self-employed as a sole trader and have earned more than £1,000 (before taking off anything you can claim tax relief on)
- Partner in a business partnership
- An employee with a total taxable income in excess of £100,000 in a financial year
- Company directors
- Company shareholder
Do I need to register for self assessment tax as a company director?
In most cases, if you are a company director or shareholder, you will need to register for self assessment with HMRC if you have received an income from the company and not paid tax at source. Whether you need to register will depend on how you receive money from your business and how much.
Firstly, if you only receive a salary from your company, and this is between £6,396 (the lower earnings limit for Class 1 National Insurance) and £100,000, you may not need to register for self assessment. This includes your income from your salary, pension, taxable benefits (e.g. company car), property, or investments. Instead, your company can pay your income tax on your behalf through the PAYE scheme.
Secondly, if you only receive income in the form of dividends from your company of under £1,000 (this is the dividend allowance for the tax year 2023/24), you will not need to register for self assessment. If your total dividends for the tax year exceed this amount, you will need to register and file a return for self assessment.
It is important to note, however, that if you receive both a salary and dividends from the company, you will almost certainly need to register for self-assessment.
Thirdly, if you have received money in the form of a director’s loan from your company, you will need to register for self assessment if it has not been repaid within the timescale required. Specifically, if the loan is not repaid within 9 months from the end of the company’s financial year, tax must be paid on the amount borrowed and declared through a self assessment tax return.
Finally, if you register a new company that has remained dormant since incorporation, you will not need to register for self-assessment as you are not receiving any money from the business. When the business becomes active, you may then need to register for self assessment.
Using HMRC’s self assessment checking service
If you are still unsure if you need to submit a self assessment tax return as a company director, we recommend using HMRC’s online “Check if you need to send a Self Assessment tax return” service.
You will be asked a series of questions, including whether you worked for yourself in the tax year, whether you were a director of a company in this period, your level of income, and details of any other forms of income. You can also ask an accountant who will be able to confirm whether you need to register for self assessment based on your individual circumstances.
How do I register for self assessment?
You can register for the self assessment using HMRC’s online platform as follows:
- Sign in to the Government Gateway – If you do not have a Government Gateway user ID and password for your personal tax, you can create a new one*.
- Complete and submit Form SA1 – you will need to enter the following details:
- Full name
- Postal address (this can be outside of the UK)
- Date of birth
- Daytime telephone number
- UK National Insurance number, and
- Why you need to register for Self Assessment
Once you have submitted your self-assessment application online, HMRC will send you a Unique Tax Reference (UTR) by post or email within 15 – 21 working days. HMRC will then write to you by email or post to ask you to submit a self-assessment tax return, and the deadline for submission. If you need your UTR faster, you may be able to access this by using the HMRC App or your personal tax account.
The rules state that you must register for self assessment by 5th October if doing so for the first time. There may be a penalty for missing this deadline.
* To register to use the Government Gateway for the first time, you will need some additional information including:
- National Insurance number or postcode and two of the following:
- a valid UK passport
- a UK photocard driving licence issued by the DVLA
- a payslip received in the last three months or a
- P60 for the last tax year
- details of a tax credit claim if you made one
- details from a Self Assessment tax return if you made one
- information held on your credit record if you have one (e.g. loans, credit cards or mortgages)
Self assessment tax return deadlines
It is essential that as a company director or owner, if you fall within the requirements to register for self-assessment and submit a return, you do so within the timescales required by HMRC. The key deadlines for the tax year are as follows:
- 5th April – tax year ends
- 5th October – deadline for self assessment registration
- 31st October – deadline for submission of a paper self assessment tax return
- 31st January (following year) – deadline for submission of an online self assessment tax return
- 31st January (following year) – deadline for the payment of any self assessment tax owed
It is important to remember that if you miss any of the self assessment deadlines above, you may be liable to pay a financial penalty of £100 if your tax return is up to 3 months late.
What are the income tax rates for 2024/25?
The current income tax rates are as follows:
|Up to £12,570
|£12,571 to £50,270
|£50,271 to £125,140
How do I file a self assessment tax return?
Those registered for self assessment are required to prepare and submit a self assessment tax return each year. As with the self assessment registration process, you can also submit your self assessment tax return online. Your accountant will normally handle this process on your behalf. To file a self assessment tax return, the following steps must be completed:
- Gather the necessary records and details that you will need to register, including your Government Gateway ID and password, national insurance number
- Sign in to the Government Gateway
- Once signed in, enter your personal details, including your unique tax reference (UTR), NI number, phone number, address, email address, date of birth, and marital status
- Answer the questions to tailor your self assessment return
- Once you have answered all of the questions, view your calculation to see if you owe any self assessment tax, and how much
- Save and submit your self assessment tax return. HMRC will then confirm receipt of your return.
Once logged in to the online self assessment platform, you can review any previous submissions and tax calculations at any time through the HMRC’s online tax portal.
If you are a company director or owner, when it comes to the matter of self assessment tax, it is imperative to engage an accountant who you can trust to handle the process for you. Your accountant will ensure that your self assessment tax return is prepared correctly and submitted to HMRC on time. Most importantly, with an expert accountant handling your personal taxes, you can focus on what you do best: running your company and making it a success.