If you are a director of a UK limited company and you pay yourself entirely through dividends with no salary, you still need to submit an RTI return to HMRC. Many directors assume that no salary means no payroll reporting. That assumption is wrong and it creates a compliance gap that can trigger penalties.

This article explains exactly what an RTI submission zero salary director scenario looks like, when you must file, what figures to use, and how to stay compliant with HMRC for 2025/26.

Why a Director With No Salary Still Needs an RTI Submission

HMRC treats directors as employees for payroll purposes regardless of whether they actually receive a salary. The legal distinction matters. A director is an office holder under employment law. Even if you draw no salary, you remain a director and therefore an employee of the company.

The Real Time Information (RTI) system requires employers to report all payments to employees to HMRC on or before the day of payment. For a director taking no salary, the payment is zero. You still report that zero. The RTI submission confirms to HMRC that no salary was paid and no tax or NI is due for that period.

Skipping the submission entirely leaves HMRC with no record of your employment status. Their systems may flag the company as non-compliant on payroll reporting. This can trigger automated penalty notices and compliance checks.

The Correct RTI Submission for a Nil-Paid Director

The process is straightforward. You submit a Full Payment Submission (FPS) showing the director as an employee with zero pay for the period. Here is exactly what goes in each field:

  • Pay frequency: Set to annual, monthly, or weekly depending on your company's normal payroll schedule. Most directors use annual for a nil-paid director because you only submit one FPS per tax year.
  • Gross pay for NI: £0.00
  • Gross taxable pay: £0.00
  • Tax deducted: £0.00
  • Employee NI deducted: £0.00
  • Employer NI: £0.00
  • Payment date: The last day of the tax year (5 April) if submitting annually, or the last day of each month if submitting monthly.

You also need to include the director's correct starter declaration. For a director who is also an employee of the company, use statement C. This tells HMRC the director has another job (their directorship) and you are applying the correct tax code.

If the director is the only employee and takes no salary, you submit a single annual FPS on or before 5 April each year. If you have other employees on payroll, you submit the nil-paid director's FPS alongside your regular payroll run at whatever frequency you use for the paid staff.

Annual vs Monthly RTI for Nil-Paid Directors

HMRC does not mandate a specific frequency for nil-paid director submissions. You choose the frequency that matches your payroll setup. Two common approaches exist:

Annual Submission

Submit one FPS on 5 April showing zero pay for the director. This is the simplest method. It works well if the director takes no salary at all during the year and no other employees exist. You still file a single FPS for that director. The company must also file an Employer Payment Summary (EPS) if no other payroll activity occurs, but for most companies with a nil-paid director, the FPS alone satisfies the requirement provided you submit it before the year-end deadline.

Monthly Submission

Submit an FPS each month showing zero pay. This is unnecessary for most directors but may be required if your payroll software forces monthly reporting or if you have other employees on monthly payroll and want to keep all submissions on the same schedule. It adds no compliance benefit. It simply creates more paperwork.

For a director who takes dividends only and no salary, the annual submission is almost always the better choice. It reduces administrative burden while staying fully compliant.

What Happens If You Do Not Submit an RTI for a Nil-Paid Director

HMRC's system expects a payroll record for every director. If you do not submit an FPS showing zero pay, HMRC will not know the director exists on payroll. This creates several risks:

  • Late filing penalties. If HMRC expects a monthly FPS and you submit none, you incur an automatic penalty of £100 per month per 50 employees for the first late filing, rising to £400 per month per 50 employees from the fourth month. For a single director company, the penalty is £100 per month for the first three months, then £400 per month thereafter. These penalties apply even if no salary is paid.
  • Compliance check risk. HMRC may open a payroll compliance check to establish why no submissions exist. This can lead to questions about director's loan accounts, dividend payments, and other transactions.
  • PAYE settlement issues. If the director later receives a salary or benefit in kind, HMRC may query the gap in reporting and require you to correct prior periods.

We have seen cases where directors who took only dividends for several years without any RTI submission received penalty notices totalling over £1,000. The penalty is avoidable with a single annual FPS showing zero.

Does a Nil-Paid Director Need a P45 or P60?

No. A P45 is only issued when an employee leaves. A director who remains in post does not receive a P45 at year-end. A P60 is only required if the director received pay during the tax year. If the director took zero salary, no P60 is issued. The annual FPS serves as the record of employment for that director.

If the director resigns or is removed, you issue a P45 showing the date they ceased employment. The P45 will show zero pay for the final period if no salary was paid in that period.

Dividends and Payroll: Two Separate Systems

Dividends are not wages. They are a distribution of company profits. Dividends do not go through payroll at all. You record dividends in the company's accounts as a distribution and report them on the director's personal self assessment tax return (SA100 or SA103). Dividends are not subject to PAYE, NI, or RTI reporting.

The RTI submission for a nil-paid director covers only the employment relationship. It confirms that the director is an employee of the company but receives no salary, so no tax or NI is due. Dividends are handled entirely separately through the company's dividend paperwork and the director's personal tax return.

This is a common point of confusion. Directors sometimes think that because they take dividends, they do not need payroll. That is incorrect. The payroll requirement exists because of the directorship, not because of the salary.

Director's National Insurance and Nil Pay

If a director takes no salary, no Class 1 National Insurance contributions (NIC) are due from either the employee or the employer. The director also does not accrue qualifying years for the state pension through employment NICs. Dividend income does not count for state pension purposes.

If the director wants to protect their state pension entitlement, they may choose to pay a small salary above the lower earnings limit (£6,396 for 2025/26). A salary of £6,396 or more in a tax year counts as a qualifying year for state pension. The employer NI on that salary is nil because it falls below the secondary threshold (£9,100 for 2025/26). The employee NI is also nil because it falls below the primary threshold (£12,570 for 2025/26).

Many directors pay themselves a salary of £12,570 to use their personal allowance while keeping employer NI at zero if the Employment Allowance covers it. But if you choose zero salary, you accept the state pension consequence.

How to Set Up a Nil-Paid Director in Payroll Software

The process varies by software, but the principle is the same across all major UK payroll packages:

Xero Payroll

Add the director as an employee with a start date matching their appointment date. Set the pay frequency to annually. Enter zero in all pay fields. Submit the FPS on 5 April. Xero will generate a nil FPS automatically if you run a zero-pay payroll run.

FreeAgent Payroll

FreeAgent handles nil-paid directors well. Add the director as an employee, set the pay frequency to annually, and run a zero-pay payroll run at year-end. FreeAgent submits the FPS automatically when you finalise the payroll run.

QuickBooks Payroll

Add the director as an employee with a zero hourly rate or salary. Run a payroll run showing zero hours and zero pay. QuickBooks will generate the FPS. You can set this up as a recurring annual payroll item.

Sage 50 Payroll

Add the director as an employee with a zero salary. Run a zero-pay payroll run at year-end. Sage 50 will generate the FPS. You can also set up a monthly zero-pay schedule if preferred.

If you use a different payroll provider, the steps are similar. The key is to ensure the FPS is submitted before the 5 April deadline each year.

What About a Director Who Starts Partway Through the Year?

If a director is appointed during the tax year, you submit an FPS showing zero pay from the date of appointment to 5 April. The FPS should show the start date as the date of appointment. If the director was appointed before the current tax year, you submit the annual FPS showing the full tax year with zero pay.

If a director resigns during the year, you submit an FPS showing zero pay up to the date of resignation, followed by a P45 showing the leaving date and zero pay.

RTI Submission for Directors Who Take Dividends Only: The Bottom Line

You must submit an RTI return for every director, even if they take no salary. The correct approach for an RTI submission zero salary director is a single annual FPS on or before 5 April showing zero pay in all fields. This keeps you compliant, avoids penalties, and correctly records the director's employment status with HMRC.

Dividends are not payroll. They are reported separately through the company accounts and the director's self assessment. Do not confuse the two systems.

If you are unsure about your payroll setup or need help setting up a nil-paid director in your software, speak to your accountant. For directors with existing payroll setups, a quick check that your nil-paid director has an annual FPS on file is a simple way to avoid a penalty that could run into hundreds of pounds.

Our ICAEW qualified team at Holloway Davies handles payroll compliance for directors across all sectors. If you need a payroll health check or want to set up compliant RTI submissions for your director-only company, get in touch.