Limited company guide
Running a side company while employed: employment contract restrictions, how PAYE and dividends interact, National Insurance, Self Assessment and when to tell HMRC.
Short answer
Yes. There is no legal bar on being a director of your own company while employed elsewhere, provided your employment contract does not prohibit it. Your salary from the job uses your personal allowance, so a side company usually pays no director's salary and profits are taken as dividends taxed on top of your employment income, with a Self Assessment return each year.
Written and reviewed by Waqas Sagar Member of ICAEW, Fellow of ACCA, Fellow of AAT, a double graduate and entrepreneur at heart, helping startups grow and serving thousands of businesses nationwide with an excellent team. Published by LimitedCompany.Accountants, 12 London Road, Morden, London SM4 5BQ. Reviewed 12 September 2026 against 2026/27 UK rates and current Companies House and HMRC guidance.
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QuickBooks PartnerCertified ProAdvisor100+ yearsCombined team experienceFully insuredUp to £2m indemnityYes. There is no legal bar on being a director of your own company while employed elsewhere, provided your employment contract does not prohibit it. Your salary from the job uses your personal allowance, so a side company usually pays no director's salary and profits are taken as dividends taxed on top of your employment income, with a Self Assessment return each year.
Check the contract first
How the tax stacks
Filings you now have
Common traps
Before you act
Most employment contracts contain an exclusivity or outside-interests clause requiring consent, and many contain intellectual property clauses that could give your employer rights over what you build on your own time if it overlaps with their business.
Ask for written consent. Directorships are public on Companies House, so an undisclosed company is easily found.
Your employment already uses the personal allowance and often the basic rate band. A second salary from your own company would be taxed at your marginal rate and would create employer National Insurance, so most people in this position take no salary and use dividends.
Dividends are taxed after the £500 dividend allowance at the dividend ordinary, upper and additional rates, and they sit on top of your employment income when deciding which band applies. If your job already pays above the higher rate threshold, every dividend is taxed at the upper rate from the first pound above the allowance.
Annual accounts and a CT600 for the company, a confirmation statement, corporation tax payment nine months and one day after the year end, and a Self Assessment return for you personally to report the dividends.
Register for Self Assessment by 5 October following the end of the tax year in which you first take dividends above the allowance.
Paying company expenses from your personal account and never recording them, so relief is lost. Taking money out as 'drawings' with no dividend paperwork, which becomes a director's loan and can trigger s455 tax. Forgetting the company exists during a busy quarter and filing the accounts late.
None of these are difficult to avoid, but they all need a habit rather than a year-end scramble.
Rates, thresholds and deadlines quoted here reflect the 2026/27 UK tax year. Check current GOV.UK guidance, or ask us, before relying on them for your own company.
Primary references
Local help
We work with company directors across London and Surrey from our office at 12 London Road, Morden, London SM4 5BQ. Pick your area, or send the form below and we will call you back.
Frequently asked
Legally, only if your contract requires it — but most do, and the directorship is public.
Usually not, if your job already uses the personal allowance. Dividends are normally more efficient; run the numbers for your own figures.
Yes. Register the company for corporation tax within three months of starting to trade, and register for Self Assessment once you take dividends above the allowance.
It can. HMRC may collect tax on dividends through your PAYE code rather than as a lump sum, once it knows about them.
Keep bank statements, sales and platform reports, purchase invoices, payroll records, VAT workings, finance agreements and Companies House correspondence. We confirm the exact list at onboarding and identify gaps before a filing deadline becomes urgent.
The fee depends on transaction volume, record quality, VAT and payroll requirements, historic catch-up and the level of reporting needed. We agree a fixed scope and price before technical work starts, with published packages available on our fees page.
Yes. We request professional clearance, collect the prior records and authorities, check the next Companies House and HMRC deadlines, and give you one clear handover list. The process is normally completed remotely.
Yes. We work through secure cloud records, scheduled reviews and digital approvals, while keeping a named team available by phone, video call and email. Clients can also visit our Morden office by appointment.
We regularly work with Xero, QuickBooks, FreeAgent, Sage and connected sales or expense apps. The right setup depends on transaction volume, integrations and the reports you need, not simply the software brand.
The relevant calendar may include annual accounts, Corporation Tax payment and return dates, confirmation statements, VAT returns, payroll submissions and Self Assessment. We map the dates from your company year end and registrations.
Included approach
Check the current rules
Deadlines, thresholds and filing rules change. GOV.UK and Companies House publish the current statutory position; advice should then be applied to your company’s circumstances.
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