It has long been a rule for the directors of small companies that along with their companies’ financial statements, they are also obliged to submit their own personal tax returns on the basis of their holding a director position in the company.
HMRC lists the factor of being a director of a limited company as a trigger for issuing a self-assessment request.
Indeed, many directors have had to submit their self-assessments even if they took only a salary from their company or did not take any other form of income at all. Some employed an accountant to prepare their self-assessment for them; some did it themselves and some inadvertently failed to file a self-assessment and received an automatic £100 fine.
The good news is that a couple of years ago, HMRC relaxed the rules with regards to directors who did not receive any income from the companies that did not have tax deducted through PAYE.
If a director is only paid a salary by their company and does not take out more than £10,000 in dividends, they are not required to submit their tax return annually.
The problem is that many directors are issued automatic requests for Self-Assessment and unless they contact HMRC, they risk receiving a £100 if they do not submit their return.
Company directors need to either log in to their HMRC or contact their accountant to find out if they still need to submit their tax returns to avoid this trap.
Obviously, there are many other reasons that require a person to submit a Self-Assessment, such as income received from self-employment, rent, or sale of capital items, such as shares and property.
If in doubt, it is advisable to use the services of a professional. We offer a free, no-obligation first consultation so you can put your mind at rest.