Tax

What is Self Assessment?

Self Assessment is the system HMRC uses to collect Income Tax from people who don't have all their tax deducted at source (via PAYE).

Current Rate (2025/26)

Based on your personal income tax rates

Example

As a director, you declare your salary, dividends, and any other income on a Self Assessment return each year.

Key Dates

Paper deadline: 31 October. Online deadline: 31 January following tax year end

How Self Assessment Works in Practice

Self Assessment is HMRC's system for collecting Income Tax that is not deducted at source through PAYE. As a company director who takes dividends, you almost certainly need to file a Self Assessment tax return each year, because your dividend income is not taxed at source. You declare all your income sources, calculate the tax owed (or your software does this), and pay any balance due.

You must register for Self Assessment if you are a company director receiving dividends, if you are self-employed, if you have rental income, if your income exceeds £150,000, or if you have other untaxed income such as savings interest above your allowance. HMRC may also issue a notice to file a return based on information they hold about you.

The Self Assessment tax return covers the tax year from 6 April to 5 April. For the 2025/26 tax year (6 April 2025 to 5 April 2026), the online filing deadline is 31 January 2027 and any tax owed must also be paid by this date. The paper filing deadline is earlier, at 31 October 2026, but virtually all returns are now filed online.

Payments on account complicate the cash flow for many directors. If your Self Assessment tax bill exceeds £1,000 and less than 80% of your tax was collected at source, HMRC requires you to make two advance payments towards next year's bill. Each payment is 50% of the current year's bill, due on 31 January and 31 July. This means in January you pay any balance from the previous year plus the first payment on account for the current year, which can be a significant cash flow hit.

Step by Step

Each year, you gather all your income information: your salary details from your P60, dividend vouchers from your company, any rental income, savings interest, capital gains, and any other income. You enter this into the Self Assessment return, either through HMRC's online system or through commercial tax software.

The return calculates your total income, applies your personal allowance and any other deductions, and determines the tax due. The tax already deducted through PAYE on your salary is credited, and the remaining balance is what you owe. If you have overpaid, you receive a refund.

Filing and payment can be done online. HMRC's system calculates the tax automatically when you submit. You can pay by bank transfer, direct debit, debit card, or through your tax code (for small amounts under £3,000). Many directors set up a budget payment plan with HMRC to spread the cost through monthly direct debits rather than facing large lump-sum payments in January and July.

Practical Tips

File your Self Assessment return as early as possible after 6 April to know what you owe and avoid the January rush, even though you do not need to pay until 31 January
Set up a monthly savings transfer to a separate account to cover your Self Assessment bill, so the January and July payments do not catch you off guard
Keep all dividend vouchers, P60, and income records organised throughout the year rather than scrambling to find them at filing time
If your income is dropping, apply to reduce your payments on account to avoid overpaying and waiting for a refund

Common Mistakes to Avoid

Missing the 31 January filing and payment deadline, which triggers an automatic £100 late filing penalty plus interest on any unpaid tax
Not budgeting for payments on account, which means your January payment can be up to 150% of your annual bill (balance plus first payment on account)
Failing to report all dividend income, which HMRC can cross-reference with your company's accounts and Corporation Tax return
Not claiming all available deductions and reliefs, such as pension contributions, gift aid donations, and professional subscriptions

Frequently Asked Questions

Do I need to file a Self Assessment tax return as a director?

If you receive dividends from your company, yes. Dividend income is not taxed at source and must be reported through Self Assessment. Even if you only take a small salary with no dividends, HMRC may still require a return if you are a registered company director.

When is the Self Assessment deadline?

The online filing deadline is 31 January following the end of the tax year. For 2025/26 (ending 5 April 2026), the deadline is 31 January 2027. Any tax owed must also be paid by this date. The paper filing deadline is 31 October 2026, but most returns are filed online.

What are payments on account?

Payments on account are advance payments towards your next year's tax bill. Each is 50% of your current year's Self Assessment liability, paid on 31 January and 31 July. They apply if your tax bill exceeds £1,000 and less than 80% was collected through PAYE. You can apply to reduce them if your income is falling.

What happens if I file my Self Assessment late?

You receive an automatic £100 penalty if the return is up to 3 months late. After 3 months, daily penalties of £10 per day apply for up to 90 days. After 6 months and 12 months, further penalties of 5% of the tax due are added. Interest is also charged on any tax paid late.

Can I do my own Self Assessment?

Yes. HMRC's online system guides you through each section and calculates the tax automatically. If your affairs are straightforward (salary, dividends, perhaps some savings interest), it is manageable. More complex situations involving multiple income sources, capital gains, or foreign income may benefit from professional help.

Source: HMRC SA100 - Self Assessment Tax Return Guide

Related Terms

Payment on Account

Payments on account are advance payments towards your next year's tax bill, each worth 50% of your previous year's Self Assessment.

Income Tax

Income Tax is the tax paid on most types of income - salary, dividends, rental income, self-employment profits.

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