Accounts & Bookkeeping

Do Directors Need To Complete A Tax Return?

This sounds like a fairly easy question to answer – it’s either a yes or no, and that’s it. A company director either should complete a tax return, or they don’t have to. Either way, it’s a straightforward thing that doesn’t need much thinking about.
Or is it?
Because it seems that there are two schools of thought on this particular subject.
Some believe that a director doesn’t need to complete a tax return at all, and the fact that these directors are not being asked to specifically by HMRC (ie, they are not receiving a letter alerting them to the fact that it needs to be done) seems to bear that out. The reasoning behind this idea is that, sometimes, a director will only be taking a small salary, and the rest is ‘topped up’ with dividends, which are tax free. And although if this salary rises above the higher tax rate level then he or she will need to pay more tax and notify HMRC, there is no legal requirement for them to register for a self assessment tax return.
Except…
Except for the fact that, even though HMRC aren’t sending out the letters as they do to others, they do say on their website that company directors ought to register (even if they don’t actually pay much tax). The only company directors who don’t need to send in a self assessment are those who worked for charities, who didn’t actually get paid, and who also didn’t have any benefits such as a car.
Confused?
So, it seems, is everyone else.
But we suggest that the best course of action for every company director is to register. It can’t hurt. And if you don’t need to send a self assessment, then you’ve saved yourself some admin work. If you do – then you’ve saved yourself a fine!

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