What tax does a limited company director pay?


I have just incorporated a new limited by shares company in Scotland, and I am attempting to wrap my head round how the taxes are going to work. Corporation tax, I get. However, what taxes am I supposed to pay as a company director? Or do I have to pay any? Thanks



As a company director, you will have to pay Income Tax and National Insurance Contributions (NIC) on the director’s salary you receive from your company. To receive a salary, your company must be registered as an employer and you will be paid and taxed through Pay As You Earn (PAYE).

If you are also a shareholder in the company, you will have to register for Self-Assessment to report any additional income you receive as dividends. You may have additional tax to pay through Self-Assessment, depending on your total annual income from all sources.

Income Tax on your director’s salary will be between 20% and 45% on anything above your tax free Personal Allowance of £10,600 (2015-16). You will be liable for National Insurance Contributions when your salary exceeds £8,060 (NIC lower profits limit for 2015-16 .

You will not pay any personal tax on dividend income unless you are a higher rate or additional rate taxpayer because your company will have already paid 20% Corporation Tax on the profits that dividends are paid from. If your annual taxable income is below £31,786 (or £42,386 including your Personal Allowance), you will be a basic rate (20%) taxpayer. You will only pay tax on dividends if your dividend income exceeds the basic rate threshold.

2 years ago

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