Are company directors self-employed? Understanding your tax and self assessment responsibilities

Many company directors, especially of small and owner-managed businesses, often wonder if they are deemed to be self-employed for tax purposes. ​

The term ‘self-employed’ is often used loosely in everyday language, but HMRC gives specific guidance around who is deemed to be self-employed. Spoiler, being a company director does not equate to being self-employed. ​

Understanding the difference is important as it affects how you pay tax, your responsibilities and your reporting obligations. ​

We’re going to clear up the confusion, explain how directors are classified and what that means in practice. ​

The short answer is no, being a company director does not mean you are self-employed. ​

By HMRC’s definition, a person is self-employed if they run their business for themselves, and take responsibility for its success or failure. This is applicable to sole traders, where the person and business are legally one and the same. ​

Company directors run limited companies on behalf of shareholders, and are classed as office holders for tax and National Insurance Contribution purposes. ​

Now you might be wondering, what if I’m the sole director and shareholder of my limited company, surely that means I fall under the definition of self-employed? The answer is no, because in the eyes of the law, the limited company is an entirely separate legal entity, distinct from directors and shareholders.​

Directors are often employees of the limited company, in addition to being an office holder. You are therefore working for and on behalf of the company and its shareholders, and in exchange you might receive a salary which is taxed through PAYE (pay as you earn). ​

A company director may also be self-employed, but it would be in a separate capacity to their work associated with the limited company.​

For example, if they were a director of a tech company but also ran a sole trader business (e.g. freelance wedding photography), the sole trader income would be classed as self-employment as it's entirely separate from their work with the limited company.​

If self-employed work is being done for the company, and the director was to invoice for work they carry out as company director (rather than take a director's salary), this would likely be contested by HMRC and disallowed as self-employment income.​

A company director usually receives at least some of their income by way of a salary (and perhaps bonuses). These are paid via the company payroll and are subject to PAYE tax and national insurance.​

If a director is also a shareholder of the company, they can also get paid via dividends. Often directors will take a small salary and the balance as dividends, as this is often the most tax-efficient.​

Directors may also receive benefits in kind, such as a company car or private medical insurance.​

Company directors will need to complete a self-assessment tax return if any of the following apply:​

If the director is receiving a salary from the company, the company must deduct income tax and National Insurance Contributions via PAYE and report this to HMRC. ​

The company must also report to HMRC (and pay the associated tax and national insurance contributions), in relation to any benefits in kind that the director receives.​

Directors are individually responsible for completing and filing their own self assessment tax return (if required).​

The self assessment filing deadline is 31 January following the end of the tax year, meaning for the 24/25 tax year the deadline is 31 January 2026.​

If the director has additional tax to pay (for example tax on the dividend income) this will need to be paid by 31 January 2026, and payments on account may also be needed.​

Record keeping is one of the most important things company directors can do to ensure their affairs are in order. Make sure you’re keeping a record of all your income, expenses, dividends (if you receive them) and any other business-related transactions.​

This includes keeping invoices, receipts and bank statements. This will help you, or your accountant pull together your self assessment tax return and means you’ll have all the supporting documents available should HMRC need to see them.​

If you're a company director and a shareholder, you should plan your salary and dividends carefully to make the most of tax allowances and minimise overall tax and national insurance contributions. This is where it’s useful to engage an accountant as they keep up to date with all the rules and regulations and should be able to help you determine the most beneficial split between salary and dividends. ​

If you are also receiving dividends then you should put aside money for tax and plan for these payments, as the tax on dividend income is not deducted at the source.​

Lastly, it’s advisable to get accounting advice early, rather than leaving it too late, so the accountant can provide the most value and ensure you're being paid in a way that is tax-efficient and in line with your goals and those of the company.​

In summary, company directors are not deemed to be self-employed on account of their position as director. They are office holders and may also be employees. ​

However, a company director may also be self-employed if they operate a sole trade business outside of their capacity as company director.​

We understand accounting and tax can be complicated. Beany's certified accountants and friendly team can prepare and file your business tax return plus returns for shareholders/directors. We carefully interpret and apply accounting and tax legislation to enable you to pay the least amount of tax legally possible.​​

Our expertise comes without the jargon and is designed to help you save both time and money. To find out more about how we can help, book a call to discuss your requirements.​