If an individual or entity is planning on incorporating a new limited company, Companies House requires that the limited company being incorporated has at least one director appointed at any point in time. Although, there can sometimes be some confusion about whether a limited company director is self-employed or whether they are an employee of the company.
This confusion can sometimes arise due to not fully understanding the difference between your employment status as a company director and being self-employed.
What is a Company Director?
When an individual is appointed as a limited company director they are not self-employed. Instead a limited company director would be referred to as an Office Holder.
An office holder is someone who has been entrusted with a position in the organisation but they do not have a contract with the company or receive regular payments.
An office holder is neither an employee or a worker of the company, but this is not to say that as an office holder you cannot receive a salary to compensate them for all of the hard work that they put into the company in addition to your duties as a limited company director.
As an office holder it is possible for you to also become an employee of the company as long as you have an eligible employment contract with the company or organisation that you are an office holder for.
If I Am Not Self-Employed Will I Need To File A Self Assessment Return?
As a limited company director is not deemed 'self-employed' you may assume that they would not need to file a Self-Assessment Return but this assumption would be wrong. Directors are required to file a Self-Assessment return to report any additional taxable income that they may have received throughout the tax year.
If as a director, all of the income that you have received from your company has been taxed at the source (paid through a payroll software where all necessary deductions such as national insurance, student loan repayments and income tax are paid) and you have received no additional income that requires reporting then you would not be expected to register for nor file a Self-Assessment Return to HMRC.
Sometimes even if all income is taxed at the source HMRC may still request the submission of a Self-Assessment Return. If you have received a 'Notice to File' but have no additional income to report then you can contact HMRC to request for this to be withdrawn.
As a company director you may receive some additional income to compensate you for extra responsibilities and tasks that you have completed. If you received any of the following as a company director then you would need to register for Self Assessment with HMRC and in turn submit a Self-Assessment Return:
- You have earnt any taxable income from the renting or letting of a property
- You have operated as a sole trader business at any point throughout the relevant tax year
- You have received dividends from your limited company
- You have earnt income from abroad that is taxable in the UK
If you have any uncertainty about whether you will need to file a Self Assessment Return you can either use HMRC's useful tool or you can contact them directly
How Can I Be Paid As A Company Director?
For most small limited companies the directors of the company are likely to be the shareholders as well as the individuals who conducts the majority of the business's activities. Therefore a company director can be compensated in several different ways.
As discussed above, a limited company director (office holder) can become an employee of the company and pay themselves a salary. In order to pay yourself a salary the company would firstly need to register for a payroll services within the company's Government Gateway account. By registering for payroll services the limited company can pay its office holders and other employees a salary for successfully complying with their responsibilities and ensuring that the company has continued to meet its filing deadlines throughout the accounting period.
There are other ways that you can compensate yourself as the director of a limited company which we have provided you with a clear guide on the different ways that you can pay yourself as a director.
Find Out More About Annual Accounts & Tax Filing
Hopefully this article has answered any questions that you may have had about whether you a limited company director is self-employed. If you wish to learn more about whether company directors need to file a Self-Assessment Return or about the inner workings of running a business such as how corporation tax is calculated, please dive into our Knowledge Base which has plenty of articles like this one to help your business thrive.
If you need to file a Corporation Tax Return or Annual Accounts, you can use our filing templates provided directly on our platform with a free account. Get started now to find out more.
