Frequently asked questions

If you own a company, you may receive dividends for your share of post-tax distributed profits, and if you’re also the director, a salary may be paid for performing your duties as an officer of the company. This is an important point, because it means you’re both an employer and an employee – of yourself! But why does it matter?

Employers and employees both pay National Insurance Contributions (NICs) on salary payments, but not on dividends. So, it might make sense to pay yourself a smaller amount as salary and be able to receive more in dividend payments. Also, the good thing about taking a salary is that it means you have regular income throughout the year which, because directors are ‘office holders’, can be below minimum wage without breaking any rules.

So how much should you pay yourself from your own company? In order to be as tax efficient as possible, paying yourself as a company director is actually a bit of a balancing act. To get the balance right it’s useful to consider at least the following:

• National Insurance contributions as both an employee and as an employer, as well as the benefits of making qualifying payments for the State Pension.
• How many people are working for your business
• Tax allowances for dividends
• Income tax allowances
• Tax relief for employee salaries

Sit tight, and we’ll talk you through director’s salaries, and what the optimum amount to pay yourself is. We know it can be confusing, so get in contact if you need more help!

The good news is that your company can pay dividends whenever you want, the bad news is that you may end up in trouble with HMRC if not done correctly!

A dividend is a payment a company can make to shareholders if it has made a profit. How do you know if your company has made profit? Your accountant will be able to tell you the exact amount.

Just be really careful, because if you take more money out of your company than you’re supposed to, it’s called a ‘directors’ loan’. And everybody pays interest on loans, even if it’s from your company! And surprise, surprise, you have to pay even Corporation Tax for Loan to Participators. Some, make sure you get a regular update from your accountant as you don’t want to pay more tax then you should!

Next step? No, it’s not the transfer to your bank account! There is some paperwork to be done, and of course we can help you with that!

Now that the money are in your bank account, make sure you pay the correct taxes on your self-assessment! 

Now is time to spend your dividends in peace as your tax declaration is in order!

‘Do you need to register for Self Assessment if you are a director?’

If you receive taxable income from your company and haven’t yet paid any tax on it, then the answer is yes. So, if you are not planning on getting any dividends and you don’t receive any allowances from your company (car, bonuses, meals, accommodation, and so on), you won’t have to submit a Self Assessment tax return. 

‘How to register for Self Assessment?’

You will most likely need to complete form SA1, and be asked to provide some personal information. After you’ve registered, you will get a letter from HMRC within around 10 working days (or 21 if you are abroad) according to HMRC rules. But in reality, it might take more than that. It will contain your UTR and information about your Self Assessment obligations, including filing personal tax returns and paying Income Tax and National Insurance contributions.

If you’re registering for Self Assessment for the first time, you will also have to add the self-assessment tab to your existing online account with HMRC or create a new online account after registration and use your UTR to sign up for the Self Assessment online service.

Within 7 working days (or 21 if you are abroad) of signing up, you should receive an activation code in the post. You will need to use this to activate and sign in to your Self Assessment online account for the first time.

Complete and file personal tax returns

You can use HMRC’s Self Assessment online service to complete and file personal tax returns every year. At least for a while as HMRC will change the rules for filing tax returns starting 6th April 2026 for some and for others from April 2027. More details about it you can find them here (and include the link for this https://www.gov.uk/government/news/government-announces-phased-mandation-of-making-tax-digital-for-itsa#:~:text=GOV.UK%20guidance%20on%20Making,with%20partnerships%20mandated%20from%202025.). The information you will need to provide on your Self Assessment tax return is stated in form SA100. You may also have to complete supplementary pages for some types of income. For example, if you receive a director’s salary through payroll, you must include form ‘SA102: Employment’ to record these taxed earnings on your tax return. This enables HMRC to work out how much Income Tax and National Insurance you owe. 

While completing all those forms make sure you know and use any reliefs and allowances you are entitled to, based on your total earnings from all taxed and untaxed sources!

Don’t forget about the deadline, or you’ll pay a penalty!

Self Assessment filing deadlines are based on the tax year, which runs from April 6th to April 5th the following year. The deadline for filing online returns is 31st January after the end of the tax year in which the income is earned. Paper tax returns have an earlier filing deadline of 31st October after the end of the tax year.

The answer is ‘What suits you better’! 

The best type of business structure for you completely depends on what you want most. For ease and privacy, being a sole trader is ideal. For (likely) better tax rates and investment opportunities, the limited company structure is better.

Often, small business owners start their companies as sole traders and then cross over to Limited Company in later years. This is a good idea to test the longevity of your business before taking on the extra legal responsibilities. So when in doubt, start there and work up to becoming a limited company.

That said, if you are a freelancer, like a graphic designer, a sole proprietorship may suit you for the length of your business.

For more guidance on owning a small business in the UK, give us a call!

Yes, if they don’t have an employment contract, they are not a worker, and therefore are always exempt from automatic enrolment.

This means that if your organization has one or more directors who do not have contracts of employment, that organization is not an employer if it does not have any staff other than the director(s). Your company will have no automatic enrolment duties and does not need to complete a declaration of compliance. 

BUT, if this is the case, the director must submit a form to the Pensions Regulator to let them know that you are not an employer.

If your organization does have other staff, then your company has duties in respect of those other staff and it is an employer. If none of the other staff meet the age and earnings criteria for automatic enrolment, you still need to complete a declaration of compliance for your company.

If the company’s circumstances change so that automatic enrolment duties apply, you will  need to inform The Pension Regulator of this as soon as possible. For example, if your company took on a member of staff other than a director, or if at least two directors started working for your company under contracts of employment.

First of all, you need to make sure that choosing to lease a car makes sense for your business, and only after that we decide the tax efficiency part. 

As we come to the second part, at the end of the day, it all boils down to what option will save you the most pennies, so let’s have a look below and decide what suits you better!

Which is more tax-efficient?

If you want to drive an economical car, like a swanky new plugin hybrid, then you’ll pay less benefit from leasing through your business. As we’ve already mentioned, keeping your CO2 emissions low will reduce the company car tax, so it’s a win-win! If, however, you’re looking for a car that emits a lot of CO2 and has a high P11D value, then leasing privately is likely to be more tax-efficient.