Limited company self-assessment: 5 things directors should consider

Company directors need to balance two sets of accounts – one for their company finances and one for their personal affairs. And yes, that does mean that you must submit a self-assessment tax return each year on top of your many other obligations.

We know you’re busy enough as it is without having to worry about your self-assessment, so we’re here to help. Here’s what you need to consider before you get started.

Record all untaxed income

If you want to get your returns right, you’ll need to account for every untaxed penny you’ve earned in the year. This usually excludes any income taxed at source, but there are still some scenarios where this needs to be reported (your accountant can help here).

• Salary and dividend income: Whether you take a director salary, dividends from company profits or a combination of the two, you’ll need to declare each distribution date and amount withdrawn.
• Additional streams of personal income: If you have any other income sources, such as rental income from properties, consultancy work outside your directorial role or any foreign income, you’ll need to declare those details in your return.

Master your allowable expenses

As a company director, knowing which business expenses you can legitimately claim against your income is essential. For example, you may be able to claim:

• Home office expenditures: If you’re working from home, a portion of your utility bills can be claimed based on the space dedicated to your business.
• Travel and accommodation: Business-related travel costs, whether it’s fuel for your car or train tickets for a business trip, are claimable. Ensure every expense is documented.
• Professional memberships: Are you required to pay for membership of any professional bodies? If so, you may be able to claim the costs on your return.

However, it’s important to note that allowable expenses differ for directors compared to the self-employed. If in doubt, give us a shout.

Track all your deadlines

Since you run a business, chances are your diary is already drowning in various dates and deadlines, but you’ll have to add a few more to the list as a self-assessment customer. Our website can keep you updated with these deadlines, but it’s a good idea to mark them on your calendar anyway:

• 31 January: the deadline for sending a return online
• 31 July: the payments on account deadline
• 5 October: the deadline for registering for self-assessment
• 31 October: the deadline for sending a paper return.

It’s important not to forget these dates. The initial penalty for missing the 31st January deadline will usually result in an immediate £100 fine. – while further delays beyond that date could prove extremely expensive.

Impeccable record-keeping is key

Maintaining detailed and organised records is your defence against potential tax investigations. Remember, HMRC can retrospectively review your tax records for up to six years, so having the following documentation in order during that period is vital:

• Invoices and receipts: Every piece of income or expense you declare should have a corresponding invoice or receipt. This ensures you can validate any figures if questioned.
• Bank statements: These offer a chronological trail of your transactions. They’re invaluable for cross-referencing with your declared income and expenses, ensuring everything aligns.
• Foreign income records: If you’ve declared income from abroad, it’s crucial to keep detailed records of the amounts and any taxes you’ve already paid in the originating country.

You won’t need to include these documents when you file your return, but you must retain them by law and present them to HMRC if they request it.

Stay updated on tax laws and regulations

The financial landscape is ever-evolving, which means the goalposts are always moving. However, you shouldn’t get caught out if you:

• conduct regular reviews: Periodically check for updates from HMRC or consider subscribing to newsletters or alerts that provide information on tax changes.
• do your research: Swotting up on tax legislation or attending accounting seminars can offer insights into the latest best practices, changes in allowances, or the introduction of new reliefs.
• consult with professionals: Engaging with a tax professional can ensure you’re compliant and optimising your tax position.

Conclusion

Navigating the self-assessment tax return process may seem challenging when you’re already juggling the many responsibilities of directing a company.

However, the process suddenly becomes more manageable when you stay on top of your obligations throughout the year — and even easier if an accountant handles everything for you.

For assistance with your company director tax return, get in touch with us today.