Running a limited company comes with responsibilities that extend beyond day-to-day operations. One of these is filing your annual self assessment tax return if you are a director. More than 12m individuals file a self assessment return each year, according to HMRC. Directors with income from salary, dividends or other sources must complete this process accurately and on time to avoid penalties. Below, we explain what’s involved, which deadlines apply and how to calculate your tax bill under the current rules.
What is self assessment for limited company directors?
Self assessment is the system used by HMRC to collect income tax. Instead of your tax being automatically deducted from wages or pensions (as under PAYE), you must submit a tax return to declare all taxable income and expenses for the tax year. For 2024/25, the tax year runs from 6 April 2024 to 5 April 2025, with an online filing deadline of 31 January 2026. If you choose a paper return, the deadline is earlier (31 October 2025), but most people file online.
Deadlines and key dates
- 6 April 2024: 2024/25 tax year started.
- 31 October 2025: Paper return deadline.
- 31 January 2026: Online return and final tax payment deadline.
- 31 July 2026: Second payment on account (if applicable).
For many limited company directors, the most important date is 31 January 2026. That’s when the online return must be submitted, and when balancing tax payments and first payments on account (if required) are due. Missing these deadlines can lead to late filing or late payment penalties.
Income and allowances
Most directors draw income as a combination of salary and dividends from their company. Your salary typically goes through PAYE, but dividends must be declared on your self assessment. In the 2024/25 tax year, the personal allowance remains at £12,570. This is the amount you can earn before you start paying income tax. Above this threshold, you will pay tax according to the relevant rate band.
For dividends, you benefit from a separate dividend allowance, which is set to decrease to £500 for 2024/25. Any dividends you receive above this allowance will be subject to dividend tax rates, which are usually lower than income tax rates on employment income. Keep in mind that if your total income (salary plus dividends plus any other sources) places you in a higher or additional rate band, the rate of tax on dividends also increases.
Calculating personal tax liabilities
- Add up all taxable income
Your total taxable income includes salary, dividends, rental income and any other earnings during the tax year. Subtract your personal allowance (£12,570) to see how much is subject to tax. - Identify the correct tax bands
Income above £12,570 is taxed at rising rates: basic rate (20%), higher rate (40%) and additional rate (45%) once income exceeds £125,140 (for 2024/25). Dividends within the £500 dividend allowance are tax free. Dividends over that limit have their own dividend tax rates, which start at 8.75% for basic rate payers. - Include national insurance contributions (NICs) where appropriate
Directors usually pay Class 1 NICs on salary. This is often calculated cumulatively if you operate a formal payroll. NICs do not apply to dividends. - Factor in payments on account
If your tax bill is more than £1,000 for the year and less than 80% of this tax has already been collected at source, HMRC may request payments on account. These are advanced payments of the following year’s bill, due on 31 January and 31 July.
Important details about expenses
As a director, you might incur legitimate business expenses. Some can be offset against your tax liability, provided they qualify under HMRC’s rules. Examples include travel costs (excluding ordinary commuting), certain business subscriptions and office expenses. However, personal or mixed-use items generally do not qualify unless you can clearly separate the business element.
It is important to keep thorough records and receipts. If HMRC decides to check your return, they can request these. For official guidance on record-keeping and allowable expenses, you can review the HMRC pages on expenses and benefits.
Director’s loans and tax implications
A director’s loan occurs when you borrow money from the company, or the company borrows from you. If you take more money out of the company than you have paid in (and this is not salary or dividends), you have a director’s loan account in debit.
- Overdrawn accounts: If your loan is not repaid by the company’s year end or within nine months, the company could face a 33.75% charge on the outstanding amount (known as Section 455 tax).
- Interest implications: If the loan is interest free or at a low rate, you might need to record this as a benefit in kind.
It’s worth seeking guidance if you have a director’s loan, as this area can affect both you and your company’s tax position.
Tips to simplify your self assessment
- Maintain clear and up-to-date records
Detailed bookkeeping throughout the year simplifies your tax return. Record dividend payouts, expenses and loans as soon as they happen. Software or cloud-based solutions can help you stay organised. - Plan dividend payments wisely
If you are able to manage how and when dividends are declared, consider the effect on your personal allowance and dividend allowance. Too large a dividend in one go can push you into a higher tax band. - Be aware of payment on account triggers
If you know your tax bill will exceed £1,000 and won’t be covered by PAYE, set aside funds early. This will help you meet the payment on account requirements in January and July, so you avoid late payment charges. - Seek professional advice
We recommend consulting an accountant if you have questions about director’s loans, complex income sources or other specific factors. For additional support, you can look at the Companies House guidance for directors.
Avoiding penalties
Late filings and payments can be costly. An initial £100 penalty applies if you miss the 31 January online deadline, even if you have no tax to pay. The penalty increases the longer your return remains outstanding. If you delay payment, HMRC can charge interest and additional penalties. Accurate and timely submissions are the best way to steer clear of these problems.
How we can help
We work with directors across the UK to simplify their personal tax affairs. Our services include preparing self assessment tax returns, ensuring you claim the right reliefs and keeping you on the right side of HMRC deadlines. You can read more about how we support businesses on our corporate services page or get practical tips from our insights section on current tax topics.
Filing a limited company self assessment return might feel time-consuming, but a reliable process is the best way to keep stress levels low. If you have any questions, our team of accountants is here to discuss the right approach for your circumstances.
If you’d like an experienced partner to streamline your limited company self assessment, contact us to arrange a friendly, no-obligation chat. We’ll tailor our advice to suit your specific needs and help you meet all compliance obligations with confidence.
