Read this before you file your self-assessment
Let's talk about something that makes most directors break out in a cold sweat: self-assessment time.
First things first: do you even need to file one?
Not all directors do. If you're only taking a small salary that's fully taxed through PAYE, no dividends, and no other income to declare, you might not need to file at all. But if you're taking dividends over £500, earning over £100,000, have rental income, significant interest, or HMRC has specifically asked you to file - you need to do a self-assessment.
Most directors taking the tax-efficient salary-plus-dividends route will need to file. If that's you, this really doesn't need to be the annual nightmare you're imagining.
Quick clarification: your self-assessment is about your personal tax. That's different from your company's Corporation Tax return. Your company pays Corporation Tax on its profits (due 9 months and 1 day after year-end). You pay Income Tax on what you personally receive - salary, dividends, rental income, interest, and so on.
Most directors get these muddled up. Capital allowances on equipment? That's your company's Corporation Tax return. R&D tax credits? Also Corporation Tax. Your self-assessment is just about you and what you've personally received.
Here are four things to check before you hit submit - for a more comprehensive view, check out our self-assessment checklist!
1. The salary and dividend approach
Most tax-efficient directors pay themselves a modest salary (ideally up to the personal allowance of £12,570 for 2024/25) and take the rest as dividends.
Dividends avoid National Insurance entirely and face lower tax rates than salary. Your accountant should already have this sorted, but chunky salary numbers on your payslips may suggest this needs looking at.
The sweet spot: paying yourself just enough salary to maintain your NI record (currently £6,396 for 2024/25) and taking everything else as dividends. The first £500 of dividends are tax-free (the dividend allowance), then you pay 8.75% up to the basic rate threshold, 33.75% for higher rate, and 39.35% for additional rate.
Compare that to salary where you'd be paying both employer's and employee's NI on top of income tax. The savings add up quickly.
2. Interest income (the one that catches everyone out)
This is the thing that makes me crack the books open every year.
Interest from your business bank account needs declaring on your self-assessment. Interest from your personal savings. Interest from that savings account you forgot you had. It all counts.
You get a Personal Savings Allowance - £1,000 if you're a basic rate taxpayer, £500 if you're higher rate, nothing if you're additional rate. Once you go over that allowance, you pay tax on the excess at your marginal rate.
Here's what catches directors out: your business bank might be paying you interest. That goes on your personal self-assessment, not your company's tax return. The bank reports it to HMRC under your personal UTR, and if you don't declare it, HMRC notices.
Also watch out for savings accounts in your name that you're using for business cash reserves. Technically personal interest, needs declaring personally, even if it feels like company money.
The banks report everything to HMRC anyway. They already know what interest you've received. They're just checking whether you're declaring it properly.
3. The small things that actually matter
The £6 weekly working from home allowance is easy money you're probably missing. That's £312 per year, tax-free, no receipts needed. You claim it through your self-assessment.
Trivial benefits under £50 per employee count too (yes, that includes you as a director-employee). Birthday gifts, small perks, team treats - as long as they're under £50 each and not cash or cash vouchers, they're tax-free. Your company pays for these, you don't declare them personally, everyone's happy.
Got kids over 13 who can handle real work? Social media, admin, packaging, filing - you can pay them up to £12,570 tax-free through the business. Proper work, proper pay, zero tax. They'll need to do a self-assessment too if their income goes over £100,000 or if HMRC asks them to, but at £12,570 or under, their tax bill is zero.
Consider your spouse, too, if they don't earn another income. Same principle applies.
These are straightforward allowances most people simply forget exist.
4. Company pension contributions (and why they're better than personal ones)
Most directors leave serious money on the table here.
Company pension contributions are tax-deductible for your company and don't count as a benefit-in-kind for you personally. When your company pays into your pension, it's deducted from company profits before Corporation Tax. You don't pay Income Tax or National Insurance on it. Nobody pays tax on it until you eventually withdraw it in retirement.
Personal pension contributions? You pay yourself the money first (with all the tax implications), then claim relief afterwards through your self-assessment. Company contributions skip that entire mess.
Your company can contribute up to £60,000 per year (or 100% of your salary, whichever is lower) into your pension without triggering tax charges. That's £60,000 of profit that avoids Corporation Tax, and you don't pay Income Tax or NI on it either.
If you're making personal pension contributions, they go in your self-assessment and you claim the tax relief there. But company contributions don't appear on your self-assessment at all - they're just a company expense that benefits you massively.
Worth checking which route you're using.
The Bottom Line
None of this is complicated tax planning or aggressive avoidance. These are legitimate, straightforward reliefs that exist specifically to support directors and small businesses.
The problem is that most directors either don't know they exist, or assume someone else is handling it (and often, nobody is).
Before you hit submit on your self-assessment, take an hour to check whether you're actually claiming everything you're entitled to. Your accountant should be on top of this, but they can't claim what they don't know about.
[This constitutes information and education - not advice. Talk to your tax advisor].
