Contractor Self Assessment: Deadlines, Payments and What to Include

Who must file a Self Assessment return

HMRC requires a Self Assessment return from anyone who meets one of several trigger conditions. The ones that most commonly apply to PSC directors are: being a company director, having untaxed income, having income above £100,000 (where the personal allowance begins to taper), or receiving dividends that exceed the £500 dividend allowance for 2026/27.

In practice, nearly every limited-company contractor who pays themselves a salary plus dividends must file. The salary component is collected through PAYE, but dividends from your own company are not taxed at source. Self Assessment is how HMRC collects the tax on those dividends, reconciles the dividend allowance, and checks that the right amount has been paid across your total income.

You must register for Self Assessment by 5 October following the end of the first tax year in which the obligation arose. So if you started drawing dividends in 2026/27 for the first time, you must register by 5 October 2027. Registering late can itself attract a penalty, and it does not extend the filing deadline.

One group that can sometimes be exempt is a single-director PSC that pays no dividends, keeps salary below the personal allowance and has no other income. Even then, check with your accountant: if HMRC has you registered as a director, they may still issue a notice to file, and ignoring a notice is a separate penalty risk.

What goes on the return: salary, dividends and other income

The Self Assessment return is a picture of your entire personal income for the tax year (6 April to 5 April). For a PSC director the main boxes to complete are the employment pages, the dividends pages and, depending on your circumstances, additional sections for savings interest or other income.

Director's salary from the company

Your salary is reported on the employment pages of the return. The gross pay, tax already deducted and NIC figures all come from your P60, which your company (via its payroll) must issue to you by 31 May after the tax year ends. If the company also provides benefits in kind, such as a company mobile phone contract or private medical cover, a P11D is issued and those benefits are also declared on the return.

PAYE deducts income tax and employee National Insurance from salary as it is paid. The return reconciles whether the right code was used and whether any adjustment is needed. For most PSC directors on a low salary (typically in the range of the secondary threshold £5,000 to the personal allowance £12,570), the PAYE liability on that salary is small and the main tax collected through Self Assessment is on the dividends above.

Dividends from the limited company

This is the component that makes Self Assessment essential for almost all PSC directors. When your company declares and pays a dividend, you receive a dividend voucher showing the amount. Dividends are reported in the "dividends" section of the return.

For 2026/27 the dividend allowance is £500. Dividends within that allowance are shown on the return but attract no tax. Dividends above £500 are taxed at the dividend rates. From 6 April 2026, under Finance Act 2026 s.4, the rates are: 10.75% on dividends that fall within the basic-rate band, 35.75% on dividends in the higher-rate band (above £50,270 total income) and 39.35% on dividends above £125,140 (the additional-rate band). These rates are higher than the 2025/26 rates of 8.75%/33.75%; the 2026/27 rates apply to all dividends received on or after 6 April 2026.

Dividends are stacked on top of your other income when calculating which band they fall into. So a director who takes a salary of £12,570 and then draws dividends has the entire dividend income sitting above the salary in their personal tax calculation. The first £500 of dividends is covered by the allowance, and the rest is taxed at the rates above.

Worked example for 2026/27: salary £12,570, dividends £40,000. Total income £52,570. The first £500 of dividends is covered by the dividend allowance at 0%. The next £37,200 falls within the basic-rate band (the basic-rate band runs from £12,571 to £50,270, a width of £37,700, of which £37,200 remains after the £500 allowance) and is taxed at 10.75%, giving £3,999. The remaining £2,300 (dividends above the £50,270 threshold, from £50,270 to £52,570) is taxed at the higher dividend rate of 35.75%, giving £822.25. Total dividend tax on the return: approximately £4,821. No income tax is charged on the salary because it falls exactly at the personal allowance.

Savings interest

Interest from bank accounts, savings accounts and peer-to-peer lending is personal income and belongs on the return if it exceeds your Personal Savings Allowance. For 2026/27 the PSA is £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers; additional-rate taxpayers have no PSA. Interest up to those figures is not taxed, but if your interest income exceeds the PSA, the excess goes on the return and is taxed at your marginal income tax rate. Banks and building societies report interest to HMRC automatically, so omitting it is a detectable error.

Contractors with significant retained cash in personal savings accounts (often the result of holding back money to pay future tax bills) can easily breach the £500 higher-rate PSA once they are a higher-rate taxpayer, which most dividend-drawing PSC directors are.

Other income to include

Rental income from property you own personally, freelance or sole-trader income alongside the directorship, income from a second employment, foreign income, state pension or other pension income, and capital gains above the annual exempt amount all belong on the return. Each has its own pages within the Self Assessment form. If any of these apply to you, your accountant needs to know before completing the return.

Deadlines: when to file and when to pay

The Self Assessment calendar has four dates that every PSC contractor should know:

• 5 October (after the tax year ends): deadline to register for Self Assessment if you have not filed before.
• 31 October (after the tax year ends): deadline for paper returns.
• 31 January (after the tax year ends): deadline for online returns AND for paying the balancing payment (the tax owed for the year just filed, after crediting payments on account already made) AND for making the first payment on account for the coming year.
• 31 July (in the following summer): deadline for the second payment on account.

For the 2026/27 tax year, the online filing deadline is 31 January 2028. Missing it triggers an automatic £100 penalty, regardless of whether any tax is owed or whether you file shortly after. After three months, HMRC can add daily penalties. After six months and twelve months, further percentage-based penalties apply. The escalation is steep and the penalties are not cancelled just because you eventually pay all the tax due.

Payments on account: how they work and why they catch contractors out

Payments on account are the mechanism by which HMRC collects income tax in advance, rather than as one large lump sum in the following January. They apply where your Self Assessment liability for the previous year exceeded £1,000 and less than 80% of your total tax was collected at source through PAYE or other deductions.

Most PSC contractors with a low salary and significant dividends find that PAYE covers a small fraction of their total liability. Dividend tax is not collected through PAYE at all. So in any year where total SA liability is above £1,000, payments on account will usually be required.

How the amounts are calculated

Each payment on account is half of the prior year's SA liability (less any amount already collected at source, and less student loan repayments). They are not based on the current year's actual income; they are based on what you paid last year. If your income has risen, the payments on account undershoot and you face a balancing payment the following January. If your income has fallen, they overshoot and you are owed a refund.

Example: in 2025/26 your SA liability was £12,000. PAYE collected £2,000 of that. Net SA liability = £10,000. Payments on account for 2026/27 = £5,000 each, due 31 January 2027 and 31 July 2027. These are made alongside and before you have even completed the 2026/27 return. Then when you file in January 2028, the balancing payment (or refund) settles the difference between the £10,000 advanced and the actual 2026/27 liability.

The cash-flow trap in January

The January due date bundles three items: the balancing payment for the tax year just ended, the first payment on account for the next year, and the deadline for the return itself. In a year where profits have grown or you have taken larger dividends than the year before, these three items together can produce a large January bill that surprises contractors who have not been setting aside reserves throughout the year.

The standard approach is to set aside a proportion of every dividend into a dedicated tax reserve account throughout the year, so the money is ready when due. Your accountant can help you estimate the right percentage based on your expected dividend level and tax band.

Reducing payments on account

If your income in the current year is lower than the prior year (for example because a contract ended, you took a career break, or your company's profits fell), you can claim to reduce your payments on account. You must apply to HMRC with a reason. If you underestimate and your actual liability turns out to be higher, HMRC charges interest on the shortfall from the original due dates. Reduce only when the fall in income is genuine and evidenced.

Self Assessment and Making Tax Digital: what PSC contractors need to know

Making Tax Digital for Income Tax (MTD for IT) is often raised in the same breath as Self Assessment. For most PSC contractors the short answer is: MTD for IT does not apply to you, at least not on your limited-company income.

MTD for IT mandates digital record-keeping and quarterly updates to HMRC for sole traders and landlords whose gross qualifying income (self-employment plus property income) exceeds the relevant threshold. The thresholds are: £50,000 from 6 April 2026, £30,000 from 6 April 2027, and £20,000 from 6 April 2028. A director's salary and dividends from a limited company are not qualifying income for MTD purposes.

This matters because some contractors also have a side-activity as a sole trader or a rental property. If that sole-trader or property income is above the threshold for their entry year, that element of their income falls under MTD and they must keep digital records and file quarterly updates for it. The limited-company income sits outside MTD and continues to be reported via the annual Self Assessment return in the normal way.

For full detail on the MTD rules and their scope, see the MTD for income tax: a contractor's guide.

How the return interacts with your limited company

Self Assessment captures your personal tax position. It sits alongside, but is entirely separate from, your company's corporation tax return (CT600). The two are connected because the way you extract money from the company determines what appears on each return, but they are filed separately and on different deadlines.

The company's corporation tax return reports the company's profits, deducts allowable expenses (including your salary, employer pension contributions and employer NIC), and computes the CT liability at 19% on profits up to £50,000 or 25% on profits above £250,000 for 2026/27. Your personal Self Assessment return then picks up the salary (already taxed through PAYE) and the dividends (paid from post-tax company profits).

A key point: the company pays corporation tax on profits, and you then pay personal tax on dividends declared from those post-tax profits. This is not double taxation in the legal sense, but it does mean the same underlying income is taxed twice at different rates. The overall combined rate is one of the factors your accountant models when deciding on the salary/dividend split for the year. For a detailed look at that calculation, see the PSC limited company contractor tax guide.

Common Self Assessment mistakes made by limited-company contractors

These are the errors that most commonly produce unexpected tax bills, penalties or HMRC compliance enquiries for PSC directors.

Filing late or not registering at all

The automatic £100 penalty for a late return is not waivable just because you eventually pay. Some contractors assume that because their salary is already taxed through PAYE, they have nothing else to declare and no return to file. If you take dividends above the £500 allowance, that assumption is wrong. Registering on time and filing on time, even in years where the tax bill is small, avoids a penalty trail.

Declaring dividends without the paperwork

A dividend is only valid if the company has distributable reserves (post-tax profits) to support it and a board minute and dividend voucher have been prepared. Contractors who draw money from the company account informally throughout the year and then treat it all retrospectively as dividends at year-end risk having some or all of those drawings reclassified as director's loans (triggering the section 455 charge at 35.75% on any amount still outstanding 9 months and 1 day after the period-end) or as salary subject to PAYE and NIC. Your accountant or payroll agent should maintain the dividend documentation throughout the year, not as a year-end tidy-up.

Forgetting savings interest

A contractor holding a tax reserve in a savings account earning even a modest rate of interest can exceed the £500 higher-rate PSA relatively easily. Banks report interest to HMRC. If the return omits it, HMRC often picks up the discrepancy through its data-matching and issues an amendment notice or opens an enquiry. Include all interest, even amounts that feel small.

Misunderstanding what PAYE has collected

Where a contractor has an inside-IR35 engagement and the fee-payer operates PAYE before paying the PSC, the tax collected at source is higher than on a typical low-salary PSC structure. That tax is credited on the Self Assessment return via the employment pages. The error is assuming it has already fully settled the tax bill when dividend income from retained profits in the company, or income from other sources, still needs to be included and may generate an additional liability.

Ignoring the personal allowance taper

The personal allowance of £12,570 (2026/27) tapers at a rate of £1 for every £2 of adjusted net income above £100,000, reaching nil at £125,140. A contractor whose combined salary and dividends enters that range loses allowance quickly, and the effective marginal rate on income between £100,000 and £125,140 is 60% (40% income tax plus the 20% effective rate on the allowance lost). The return calculates this correctly, but contractors who have not planned for it face a much larger bill than they expected. The solution is planning before the year-end: an employer pension contribution from the company (deductible against CT, no NIC, not income for the director) can reduce adjusted net income below the taper threshold. See the contractor accountant guide for more on the kind of planning your accountant should be doing proactively.

Not accounting for payments on account in year-one

In the first year you file, there is no prior-year liability to base payments on account on, so you pay only the actual tax for that year. In year two, payments on account based on year one's liability start. Contractors who have a strong first year are sometimes caught off-guard by the January bill in year two, which covers the year-one balancing payment (often zero, since no POAs were required in year one) plus two payments on account based on the year-one figure. Setting aside the right proportion of every dividend throughout year one means year two's bills land without a crisis.

Keeping your records through the year

HMRC requires you to keep records supporting your Self Assessment return for at least 22 months after the end of the tax year (for employed and director income) or five years and 10 months for self-employment income or rental income. For most PSC directors that means: payslips, P60, P11D (if applicable), dividend vouchers and board minutes, bank statements, any expenses records, and records of other income.

Good in-year bookkeeping with your company accounts software makes the annual return much simpler. Most of the figures your accountant needs for your personal return flow directly from the company records: salary from payroll, dividends from the company accounts. The personal items (savings interest, other income) are the ones to track separately throughout the year.

Self Assessment in the context of IR35

IR35 status affects which income appears on the return and at what point. For an engagement outside IR35, the standard PSC pattern applies: salary through PAYE, dividends from post-tax company profits, reported annually on Self Assessment.

For an engagement caught inside IR35 under Chapter 10, the fee-payer deducts PAYE and NIC before paying the PSC. That income is treated as employment income in the director's hands, collected mostly through PAYE. It still appears on the Self Assessment return via the employment pages, with the PAYE credit reducing the balance due. Any dividends declared from profits the company retains on other (outside-IR35) income are reported separately on the dividends pages.

Contractors working across a mixed portfolio (some contracts outside IR35, some inside) need to ensure their return captures both streams correctly. The inside-IR35 income will have had PAYE applied; the outside-IR35 profit extraction through dividends will not. A good specialist contractor accountant manages both. If you are reviewing your overall structure, our contractor accountancy services page explains how we approach this for PSC directors.

Getting the return right

Self Assessment is administratively simple in a good year with clean records, but the contractor-specific elements (dividend allowance interaction, payments on account timing, inside/outside IR35 income mixing, the personal-allowance taper) create real complexity that generic accounting software or a generalist accountant can miss. The cost of getting it wrong is not just the penalty: an error in how dividends are declared or how payments on account are calculated can compound across multiple years.

A specialist contractor accountant manages the return as part of a year-round service: payroll, dividend documentation, year-end accounts, CT600 and Self Assessment filed together, with proactive tax planning built in. If you want to understand how we approach this for limited-company contractors, visit our services page or contact the team directly.