Are Nominee Director Fees Taxable in the UK?

Yes. Nominee director fees are taxable in the ordinary case. HMRC treats a director as an office holder and generally treats earnings from that office as employment income. The company in which the person holds office should normally operate PAYE, deduct Income Tax and deal with Class 1 National Insurance through payroll. The word “nominee”, an invoice or a part-time arrangement does not automatically make the fee self-employed income.

This overview was checked on 19 July 2026. It explains the default position and the evidence to request, but it cannot classify a particular payment without the appointment terms, payment route and wider facts.

This page owns the taxability overview and records checklist. The PAYE-or-self-employed guide owns the detailed classification and narrow-exception analysis, while the Self Assessment guide owns the individual’s filing decision.

Begin with the reason for payment

The useful first question is not “Is this side income?” It is “What is this payment for?”

If it pays an individual for holding a director’s office or doing work in that capacity, HMRC’s guidance on directors says the earnings are employment income and subject to Class 1 National Insurance, apart from limited exceptions. The size, timing and part-time nature of the payment do not change that starting point.

Tax is only one part of the decision. A nominee director is still a director in law. A fee or private agreement cannot transfer away the duty to exercise independent judgement and reasonable care, skill and diligence. Read the site’s director responsibilities guide before viewing the offer only as extra income.

PAYE is the normal route

HMRC’s published view in EIM02504 is clear: fees for work carried out as a director are generally assessable on that director as employment income. The company in which the office is held should therefore normally deduct tax under PAYE.

A sound payment proposal should answer three questions:

1. Where is the office held? Check the office-holding company’s exact legal name and number.
2. Who will pay? The contract, payroll record and bank transaction should identify the payer consistently.
3. How does the gross fee become the net payment? The company should explain deductions and provide payroll evidence.

The office-holding company has payroll responsibilities. It is not accurate to shift the whole issue to the recipient with “you handle your own tax”. The director must still check the gross fee, deductions and net receipt, keep the documents and raise errors.

PAYE collects tax; it does not certify that an appointment is genuine, lawful or suitable. Nor does it settle whether the individual has a separate Self Assessment obligation.

Keep three tax questions separate

Discussions about paid appointments often merge questions that need different answers.

Is the fee taxable?

Generally, yes. Payment for holding the office is not automatically tax-free.

Should the company use PAYE?

Normally, yes, under the office-holder baseline. A different route needs a proper statutory and factual basis.

Must the director send a tax return?

Not solely because they hold office. Filing depends on all relevant circumstances, including dividends, other untaxed income and any notice from HMRC. The Self Assessment guide for directors covers that decision.

Keeping these questions apart avoids two errors: treating a PAYE fee as non-taxable, or assuming that every director must file even when no filing criterion applies.

A different tax route needs a separate classification

This overview does not reproduce the statutory classification tests. A narrow appointing-company or professional-partnership treatment can apply only when its detailed relationships and conditions are met. In that exception, “appointing company” is a specific HMRC term; it is not a synonym for the office-holding company in the ordinary PAYE rule. A platform introduction, invoice, business account or nominee label does not create the exception.

If the office-holding company proposes anything other than PAYE, ask for the written legal and factual basis and use Are Director Fees PAYE or Self-Employed Income? for the condition-by-condition analysis. Do not form a company or issue an invoice merely because an introducer says that is standard.

Identify every part of a mixed payment

A contract may call everything a “fee” even though amounts serve different purposes. Ask for an itemised statement.

Director remuneration

An annual, monthly or one-off amount paid for holding office or carrying out director work is generally employment income. Irregular payment does not turn it into self-employed turnover.

Expense reimbursement

Repayment of a genuine business expense may be treated differently from remuneration. The result depends on the expense, its purpose and the employee-expense rules. Keep the receipt, business reason, claim and repayment record. Query a rounded amount labelled “expenses” without evidence.

Referral income

A payment for introducing another person is not necessarily a director’s fee. It is also not automatically tax-free or covered by a trading allowance. Its treatment depends on the activity and the recipient’s wider circumstances.

Separate services

Consultancy genuinely outside the office needs its own analysis. A second contract is not conclusive if the work is really part of the directorship. Define the work and price separately, and obtain advice where the boundary is unclear.

Dividends

A dividend follows share ownership and distributable profits, not directorship alone. A director who owns no shares should question any proposal to relabel remuneration as a dividend.

Keep National Insurance separate

Directors are generally treated as employees for Class 1 National Insurance, but the director earnings-period mechanics and any narrow exclusion need their own analysis. The PAYE or self-employed guide covers that distinction; this page does not calculate rates or thresholds.

What if the fee has not been paid?

Appointment and payment are different events. A person can become a director before receiving any remuneration, and applying for an opportunity does not guarantee either event. Do not report an amount merely because an advert or unsigned proposal mentions it. Instead, keep the dated appointment and fee documents, record whether a legal right to payment has arisen, and check the relevant tax rules if money is delayed, waived, redirected or paid after resignation. Those facts can affect when and to whom income is treated as arising, so ask a tax professional rather than choosing a date from the bank statement alone.

Hand off the tax-return decision

PAYE does not by itself prove that no return is required, and holding office no longer puts every director into Self Assessment automatically. Dividends, other untaxed income, an HMRC notice or the person’s wider circumstances can change the answer.

Use Do Company Directors Need Self Assessment? for the filing decision. If HMRC has issued a notice to file, act on it unless HMRC confirms that it has been withdrawn.

Keep a traceable evidence file

Retain enough information to show what was agreed, paid and reported:

• appointment letter, consent and effective date;
• signed fee agreement and variations;
• payer’s legal identity and payroll contact;
• payslips and gross-to-net calculations;
• P45 and P60 where applicable;
• bank records matching each payment;
• expense claims, receipts and repayment statements;
• separate records for referral or consultancy income;
• details of benefits in kind;
• correspondence supporting any non-PAYE route; and
• resignation notice and final payment paperwork.

The retention period depends on the filing route and circumstances. Follow HMRC’s current guidance for the relevant tax year instead of choosing an arbitrary short period.

Review the payment before agreeing

Work through these steps:

1. Confirm the office-holding company and office.
2. Identify every proposed payment and its purpose.
3. Ask whether the fee is gross or net and who runs payroll.
4. Obtain the PAYE explanation or exact basis for a claimed exception.
5. Separate expenses, referrals, other services and dividends.
6. Check which payroll and year-end documents will be supplied.
7. Consider all other income and any HMRC notice to file.
8. If you claim Universal Credit, read the separate director fees and Universal Credit guide; tax treatment does not decide the benefit result.

An unanswered question about the payer or PAYE route is a reason to pause, not an invitation to guess.

Two illustrative outcomes

Continue to wider checks: The office-holding company identifies itself, quotes a gross fee, confirms PAYE, explains deductions and includes payroll documents in the written terms. The proposed tax route fits HMRC’s starting point. The candidate must still verify the company and assess the full legal duties.

Pause before accepting: An intermediary calls the payment “tax-free side income”, asks a newly formed personal company to invoice and will not identify the office-holding company’s payroll position. The candidate should request the legal basis, decline payment while it remains unclear and obtain independent tax advice.

These are hypothetical examples, not testimonials or conclusions about any provider.

Take a proportionate next step

Obtain the appointment and fee terms before consenting. Ask the company to confirm the gross amount, payer, PAYE treatment, National Insurance approach and records it will provide. If it proposes self-employment, payment to another company or mixed income, have a UK tax professional check the documents. Then assess the company, its controllers and the legal office: correct payroll does not make an unsuitable appointment safe.