Paying Yourself a Salary From Your UK Company: The PAYE and RTI Rules Non-Resident Directors Get Wrong

Many non-resident owners of a UK limited company assume payroll rules are not their problem. They take profits as dividends, they live abroad, and "payroll" sounds like something only companies with staff need to worry about. Then they decide to pay themselves a modest director's salary, run it through the company, miss a single filing, and an automatic penalty lands. Here is how PAYE and Real Time Information (RTI) actually work for a UK company director — and, just as importantly, when you do not need to register at all.

Being a Director Does Not Automatically Mean Payroll

A company director is an "office holder," not automatically an employee sitting on a payroll. You can be appointed as a director and take no salary at all — many non-resident owners deliberately do exactly that and draw only dividends. You are only pulled into the PAYE system when the company actually pays earnings — to you or to anyone else — that cross the thresholds below. Directors do have their own National Insurance rules (an annual earnings period, set out in HMRC's guide CA44), but that only becomes relevant once a salary is being paid.

When You Must Register for PAYE

Since April 2025 the trigger to operate PAYE is the secondary threshold. For the 2026/27 tax year that is £5,000 a year — £417 a month, or £96 a week. You must register as an employer and report through PAYE if any employee, including yourself as director, is paid at or above that level.

You also need to register if an employee earns above the Lower Earnings Limit (£6,708 a year, £559 a month or £129 a week for 2026/27), has another job, receives a pension, or gets taxable expenses or benefits such as a company car. If you take only dividends and pay no salary above these limits, you may not need a PAYE scheme at all — which is exactly why some one-person companies never register.

The Registration Deadline People Miss

You must register before your first payday. There is a timing trap in both directions: you cannot register more than two months before you start paying people, and HMRC can take up to around 15 working days to issue your employer PAYE reference and Accounts Office reference. Without those references you cannot file a compliant payroll submission, so leaving registration until the day before payday is a genuine risk.

RTI: Report On or Before Every Payday

Once you have a scheme, you report in real time. A Full Payment Submission (FPS) must reach HMRC on or before each payday — every single time a salary is paid, even if it is just £417 to one director. In a tax month where nobody is paid, you send an Employer Payment Summary (EPS) instead, so HMRC knows there is genuinely no return rather than assuming you simply forgot. Missing an FPS is the single most common trigger for an automatic penalty.

The Penalties

Late filing penalties depend on the size of your scheme: £100 a month for 1 to 9 employees (which covers almost every director-only company), £200 for 10 to 49, £300 for 50 to 249, and £400 for 250 or more. You can only be charged one penalty per tax month per scheme. HMRC does not charge for the first month you file late in a tax year, and new employers get a 30-day grace period on their very first FPS. But if a return is more than three months late, HMRC can add a further penalty of 5% of the tax and National Insurance that should have been reported.

Paying HMRC: The 22nd of the Month

Filing is separate from paying. Any income tax and National Insurance you deduct has to reach HMRC by the 22nd of the following tax month if you pay electronically — or by the 19th if you pay by post. Late payment can attract its own penalties and interest, so a director who files the FPS but forgets the payment is only half compliant.

The Employer National Insurance Twist

Employer (secondary) National Insurance is charged at 15% on salary above the £5,000 secondary threshold for 2026/27. This is why a salary set at exactly the secondary threshold is a common choice: it keeps the director's National Insurance record ticking over without generating an employer NIC bill. Be aware, too, that the Employment Allowance — which many businesses use to offset employer NIC — is generally not available to a company whose only employee paid above the secondary threshold is a single director. A lot of one-person companies assume they can claim it, and cannot.

What Being Non-Resident Changes

Living outside the UK does not switch any of this off. A UK company that runs a UK salary operates PAYE regardless of where its director lives. What your residence does affect is your personal position — whether you owe UK income tax on the salary, and whether you can use the UK personal allowance, depends on your residence status and any double-taxation treaty between the UK and your country. National Insurance can still apply to a director's earnings. Those are individual questions, and the answers vary from person to person, which is exactly where getting proper advice pays for itself.

Have Questions About Your Own Situation?

Deciding whether to run a salary at all, and how to stay on the right side of PAYE and RTI as a non-resident director, is much easier when you can talk it through with someone who does this every day. No pressure, no hard sell — just clear answers for your specific situation.

Book a free consultation with our experts →