What taxes does a UK limited company director pay?

Directors typically pay a combination of: salary income tax and National Insurance (on salary above personal allowance/NI thresholds), dividend tax (on dividends above the £500 allowance from 2024/25), and the company pays corporation tax (19%–25%) on its profits. The most tax-efficient structure for most owner-directors is a low salary (up to the NI secondary threshold) topped up with dividends, but this depends on individual circumstances — take advice from an accountant.

What is the corporation tax rate for a small UK limited company?

The small profits rate is 19% on profits up to £50,000. The main rate is 25% on profits above £250,000. Between £50,000 and £250,000 a marginal relief taper applies, giving an effective rate between 19% and 25%. These thresholds are divided between associated companies, so if you have two related companies, the thresholds halve for each.

When must a UK limited company file its corporation tax return?

The company tax return (CT600) must be filed with HMRC within 12 months of the end of the accounting period. Corporation tax itself is due 9 months and 1 day after the end of the accounting period for companies paying at the small profits rate. Very large companies pay in quarterly instalments. HMRC imposes automatic penalties for late filing and interest on late payment.

UK taxation basics for a director of a limited company

Tax is the single most common reason a healthy-looking UK micro-business runs into trouble. Not because the rules are unfair, but because directors miss filings, mis-classify income, or set their own pay without thinking about the tax tail. Here is a plain-English overview of the five taxes every director should be able to explain off the top of their head.

1. Corporation tax

The company pays this on its profits. For 2026 the main rate is 25% on profits over £250,000, with a small-profits rate of 19% under £50,000 and marginal relief in between. The deadline is 9 months and 1 day after your year-end. Set up direct debit with HMRC the moment your accounting period closes so the payment leaves your account automatically.

2. VAT

If your taxable turnover crosses £90,000 in any rolling 12 months you must register. Once registered you charge VAT on sales (the "output"), reclaim VAT on purchases (the "input") and pay the difference to HMRC every quarter. Making Tax Digital means you must use compatible software (Xero, FreeAgent, QuickBooks, Sage all qualify) and file electronically. Voluntary registration is sometimes useful — for example if your customers are VAT-registered businesses who can reclaim it anyway.

3. PAYE

If you employ anyone — including yourself as a director on a salary — you operate PAYE. Income tax and National Insurance are deducted at source and paid to HMRC monthly. Even a one-person company often runs a small director's salary at the National Insurance secondary threshold (around £9,100 for 2026) because it builds state-pension credits and is tax-efficient.

4. Self-assessment

As a director you must file a personal self-assessment by 31 January each year for the prior tax year. This reports your director's salary, dividends, savings interest and any other income — and works out personal tax due on top of what PAYE already collected. Set up a separate bank pot called "my tax" and put 30% of every dividend into it as it lands. Future-you will be grateful.

5. Dividend tax

Most directors take a small salary plus dividends from retained profits. The 2026 dividend allowance is £500; above that, dividends are taxed at 8.75% (basic rate), 33.75% (higher) or 39.35% (additional). The company must have distributable reserves — you cannot pay a dividend out of borrowed money. Document every dividend with a board minute and a counterfoil; HMRC asks for both during enquiries.

Penalties — and how to avoid them

HMRC penalties stack fast. £100 immediately for a late return, £100 more after three months, and percentage-based penalties on late payments. The fix is not heroics — it is a calendar. Block out the deadlines for the next 12 months in your personal diary today.

When you do not have to do it alone

A good UK chartered accountant typically charges between £900 and £2,500 a year for a micro-business and pays for themselves in the first year through avoiding mistakes. ICAEW and ACCA both have searchable member directories. The HMRC business support helpline (0300 200 3700) is free if you want to ask a direct question.

Frequently asked questions — UK taxation basics for directors

What taxes does a UK limited company director pay?: Directors typically pay a combination of: salary income tax and National Insurance (on salary above personal allowance/NI thresholds), dividend tax (on dividends above the £500 allowance from 2024/25), and the company pays corporation tax (19%–25%) on its profits. The most tax-efficient structure for most owner-directors is a low salary (up to the NI secondary threshold) topped up with dividends, but this depends on individual circumstances — take advice from an accountant.
What is the corporation tax rate for a small UK limited company?: The small profits rate is 19% on profits up to £50,000. The main rate is 25% on profits above £250,000. Between £50,000 and £250,000 a marginal relief taper applies, giving an effective rate between 19% and 25%. These thresholds are divided between associated companies, so if you have two related companies, the thresholds halve for each.
When must a UK limited company file its corporation tax return?: The company tax return (CT600) must be filed with HMRC within 12 months of the end of the accounting period. Corporation tax itself is due 9 months and 1 day after the end of the accounting period for companies paying at the small profits rate. Very large companies pay in quarterly instalments. HMRC imposes automatic penalties for late filing and interest on late payment.