According to HMRC, self-assessment for directors is mandatory to evaluate, report and pay income tax and national insurance contributions on dividends untaxed at the source. In other words, if you’re a director and received any dividend or untaxed income over your salary, you must register for self-assessment tax return with HMRC.
In this piece, you’ll find out all the required information to seamlessly file your self-assessment tax return as the company director and avoid penalties. In addition, we will also look at self-assessment filing in general.
CloudCo Accountancy Group Self-Assessment Tax Return Services for Directors
At CloudCo, we offer:
- Prompt and accurate self-assessment tax return filing
- 24/7 expert tax advice including capital gains tax
- Dealing with the Inland Revenue on your behalf
- Tax planning advice and implementation
- Competitive pricing
How does self-assessment for directors work?
You can process your self-assessment tax return either online or by post via the form SA100. You can either do this yourself or appoint an accountant to finish the process for you.
The process to fully register for self-assessment tax return is a bit confusing for limited company directors but still reasonably straightforward, as evident here.
- Head to www.gov.uk or visit the self-assessment tax return page
- Complete the online form SA1
- You’ll receive your UTR number in the post within approximately ten working days (or 21 if you’re abroad) of completing the form.
- Once you receive your UTR number, you can enroll online for self-assessment by creating your Government Gateway account and password. Your unique User ID will also be generated
- You’ll get an activation code within seven working days (or 21 if you’re abroad)
- Next, activate your online account by logging in with your User ID, password, and activation code when requested within 28 days.
Upon successful registration, your self assessment tax and National Insurance liabilities will be calculated. Further, you will be informed of how much you have to pay upon returns completion.
What is required?
To complete your registration for tax returns using form SA1, you must round up the following information/documents.
- Your full name
- Your permanent address
- National Insurance number
- Unique Taxpayer Reference (UTR) (if you have previously registered for self-assessment)
- Telephone number
- Email ID
- The date on which you received your directorship income and/or any other personal income (e.g. dividends)
Before you begin filling the form SA100, it is necessary to gather all the relevant paperwork and documents. This includes records of the sales and income, expenses and bank statements of your business.
You might need your employer to give you a P60 form that shows the income as well as the tax that you have paid on it.
You might even need a P45 form in case you have left a particular job within a specific tax year or a P9D/P11D showing any expenses and benefits.
Remember all the interest details that you have received on building society or bank accounts, dividends from any investments or other income you get.
How Does It Work?
You can file your tax return on paper or online.
- You can print a copy or save everything for your records.
- You can file later as the last date for self-assessment on paper is 31st October while for online submission, you will have till 31st January.
- The National Insurance and tax contributions that you owe are calculated automatically so that you can view and adjust the payments easily.
- HMRC immediately acknowledges your tax return. Hence, you do not have to stress over losing it in the post.
- Finally, you can check your account whenever you want to view the previous tax payments as well as the tax you owe.
If you wish to submit your tax online, register at the official website of HMRC for an online account. You will then receive an activation code via post to initiate. Hence, it is best not to drag your feet and begin the process as soon as possible.
How much does it cost?
You can either file your self-assessment returns yourself or let an accountant take over. In the latter, the cost for filing tax returns depends on the complexity and scope of your finances.
The higher your director’s salary and other untaxed income, the higher the cost is likely to be. On average, an accountant charges a one-off fee of £200 to £350 to file your annual tax return.
Why choose us for your self-assessment tax return?
Filing tax return can be confusing. Suppose you’re not 100% sure of any part of your return. In that case, your tax situation is complex, or you’re foreseeing a significant tax bill, having professionals such as CloudCo Accountancy Group help you out is always appreciated.
It is pertinent to mention here that filing your tax return is super easy and straightforward. That said, if your entire tax situation is complex or you are not 100% sure of any part of your tax return, or you are expecting a significant tax bill, it is best to employ an accountant who can help you out.
Although yes, this will be an added expense, you will be extremely grateful for the help and costs you end up saving in the long term.
Do I need to do a self-assessment if I am a director?
A director doesn’t have to register for self-assessment if their income from all sources is paid and taxed through PAYE (or similar). Furthermore, there is no need to file a tax return if there’s no taxable income at all.
Is a director of a Ltd company self-employed?
A director of a limited company is not technically self-employed. Their income is similar to other employees of the company besides a share of its profits through a dividend payment.
What do I need to declare for self-assessment?
For your self-assessment, you have to declare specific details that vary.
For instance, you must declare:
- Details of your foreign income from the tax year
- Income from self-employment
- Interest on share
- Records of any expenses relating to self-employment
But there are some important details to keep in mind as well.
If you get a notice for self-assessment or a tax return form, it means that you are legally obliged to fill it up, and self-assess your complete tax liability. However, as per government figures, over 400,000 people do not have to fill in the self-assessment form year after year.
Therefore, you might want to check if you really need to do it before you begin.
If you are currently in a business partnership, a company director or work as a sole trader and have a salary within a specific financial year, you are required to file a tax return.
The same holds true for employed individuals and those who pay their tax through PAYE but have self-employed income coming in as well.
A few other circumstances might necessitate you to fill a self-assessment form like claiming additional relief on tax on pension contributions in case you fall in the bracket of a higher rate taxpayer.
On the contrary, if you are sure that filing a tax return is not required on your part, it is still advisable to call HMRC and then request that they withdraw it.
In addition to that, if you are not able to submit your tax return by the stipulated deadline of HMRC, you will have to pay an automatic penalty of 100 pounds as well as added interest and penalties on the tax that you owe.
In addition to these, it is advisable to consult your accountant or tax advisor to ensure you’re not missing something while you file a self-assessment that needs to be declared as the company director.
Contact CloudCo Today
If you are struggling to understand the complex tax return and correctly complete them then rest assured that you aren’t alone. Ongoing changes to tax legislation result in taxpayers incurring penalties by failing to complete their returns correctly and on time.
Whether you are working as a sole trader, through a limited company, or self-employed, you need to fill in an assessment tax return. The same holds true for company directors as well.
We at, Cloudco Accountancy Group, offer a comprehensive tax return service that ensures that there will be no mistakes. Rather you need help with capital gains taxable income, figuring out the complexities of national insurance contributions, or just guidance to help file a self assessment return, we are here for you.
Besides undertaking the obligatory computations and completing your return, we will also advise on how you can minimise your tax liability as a director and in case any tax issue arises with HMRC, we will directly deal with HMRC on your behalf.