Non-Executive Director Fees and the US Person: Why a UK Board Seat Is Messier Than It Looks

A UK board seat is an office, not a contract, and that one fact drives everything else. HMRC treats directors' fees as employment income, taxed through PAYE with Class 1 National Insurance alongside. The IRS starts from the opposite end and treats corporate director fees as self-employment income. One payment, two characterisations, and two social security systems with a claim on it.

Key takeaways

A directorship is an office, so fees are in strictness employment income and PAYE should be operated by the company where the office is held.
Billing a UK directorship through your own company usually fails: the statutory route needs an appointing company with a right to appoint you.
Class 1 NICs apply, and directors have an annual earnings period, so irregular fees are measured against the whole tax year.
IRS Publication 525 states that corporate director fees are self-employment income reported on Schedule C - the US starting point, though it is fact-dependent.
UK National Insurance and US self-employment tax can both land on the same fee. The treaty does not fix that; the social security agreement and a certificate of coverage do.
The treaty's saving clause means relief for UK income tax runs through the foreign tax credit, where a board fee generally sits in the general category.
The NIC concession for non-resident directors is closed to Americans, precisely because the UK and the US have a social security agreement.

A directorship is an office

HMRC's Employment Status Manual defines an office, following the case law, as a post which can be recognised as existing, whether it be occupied for the time being or vacant, with a sufficient degree of continuity to admit of its being held by successive incumbents, and office holders are automatically chargeable as employment income on its emoluments.

A director is the textbook case. HMRC puts it without qualification: a company director holds an office, and any earnings arising from a directorship are therefore chargeable as employment income and subject to Class 1 NICs.

That is why ordinary employment-status reasoning does not help a non-executive: control, substitution and mutuality decide whether a consultant is employed or self-employed, and none of them gets past the office. The Employment Income Manual states the consequence: fees received in respect of work carried out as a director are in strictness assessable on the director as employment income, and tax should therefore be deducted from those fees under PAYE by the company with which the office of director is held.

Why "just bill it through my Ltd" usually fails

There is a route by which directors' fees are taxed as a company's income rather than the individual's, but it was not built for personal service companies. Since 6 April 2018 it sits in section 6(5) ITEPA. HMRC's conditions require that the director was appointed by a company other than the paying company, that the appointing company's profits are within the charge to income tax, and that by agreement the director must account to it for the fees. One of two further conditions must then be met: either the appointing company had the right to appoint the director by virtue of its shareholding in, or agreement with, the paying company, or the company is not one the director or a connected person controls.

A one-person consultancy usually fails both limbs. It holds no right to appoint anyone to a client's board - the individual was invited personally - and the individual controls it.

National Insurance mirrors this. Regulations 27(1) and (3) of the Social Security (Contributions) Regulations 2001 exclude directors' fees from Class 1 where a company has the right to appoint a director to another board, provided the fees are handed over and form part of that company's chargeable profits. The relief targets genuine nominee appointments, not a service company created to receive one fee.

National Insurance and the directors' earnings period

Directors do not get a normal NIC earnings period. GOV.UK explains that contributions are worked out from their annual earnings rather than from what they earn in each pay period, using either the cumulative method, recalculated on total pay for the tax year so far each time the director is paid, or an alternative method that charges each payment on a period basis with a year-end reconciliation.

For a non-executive on quarterly or ad hoc fees, that matters. Irregular payments do not each receive a fresh threshold, and a single large fee late in the year is measured against the whole year, which can differ sharply from the equivalent monthly salary. Appointment or resignation part-way through a year has its own rules.

One nuance before assuming the regime applies at all: a director of a company not within sections 1 and 1043 of the Companies Act 2006 does not have an annual earnings period. Rates and thresholds change every year and are published on GOV.UK.

The US side: self-employment income, not wages

Here the systems part company. IRS Publication 525, under fees for services, states that corporate director fees are self-employment income, reported on Schedule C (Form 1040).

Self-employment tax follows from that characterisation. The IRS requires you to pay self-employment tax and file Schedule SE (Form 1040) where net earnings from self-employment were $400 or more, and adds that the rules apply no matter how old you are and even if you are already receiving Social Security or Medicare.

Two cautions. It is a starting point, not a conclusion: whether a particular board fee is net earnings from self-employment turns on that person's facts, including the trade or business they carry on and how the appointment is documented. And the UK's treatment does not settle it - PAYE and Class 1 deducted in London do not convert the payment into wages for US purposes.

The mismatch, and the tool that fixes it

So the same fee can attract UK Class 1 NICs as employment earnings and US self-employment tax as business income. The income tax treaty does not prevent that, because social security charges are not income taxes.

The instrument is the social security agreement. GOV.UK's NI38 guidance lists the countries with an agreement with the UK, and the USA is on that list. The IRS describes such agreements as existing for the purpose of avoiding double taxation of income with respect to social security taxes and as settling which country's system applies.

The evidence is a certificate of coverage.

To show self-employment income is subject only to foreign social security taxes and exempt from US self-employment tax, the IRS says to request a certificate of coverage from the appropriate agency of the foreign country and attach a copy to Form 1040 each year.
HMRC issues the mirror-image certificate, confirming you only pay UK National Insurance while working in an agreement country.

The agreement decides, not preference, and the certificate should exist before the position is relied on. We set out the mechanics in US-UK social security and National Insurance: which country do you pay?.

The foreign tax credit, and which basket the UK tax lands in

Income tax is separate, and a US citizen cannot simply exempt the fee by treaty. Article 1(4) of the 2001 convention provides that a Contracting State may tax its residents, and by reason of citizenship may tax its citizens, as if this Convention had not come into effect. Relief therefore runs through the credit, not through exemption.

Basket allocation follows the character of the income. The instructions to Form 1116 describe general category income as including wages, salary, and overseas allowances of an individual as an employee and income earned in the active conduct of a trade or business, while passive category income covers dividends, interest, royalties and rents. A board fee is employment income to HMRC and business income to the IRS - either way it lands in the general category, which usually helps, because it can share a limitation with other general category earnings.

The limitation still bites. IRS Topic 856 states that the credit is the smaller of the foreign tax paid or accrued, or the US tax attributable to your foreign source income, and that unused foreign tax carries back one year and forward 10. Excess UK tax is not lost; it joins the carryover pool - see foreign tax credit carryovers.

Expenses and travel to board meetings

Expect less relief than instinct suggests. A non-executive is an office holder, so the ordinary employee travel rules apply. GOV.UK's booklet 490 defines ordinary commuting as travel between a permanent workplace and home, a permanent workplace being one the employee attends regularly for the duties of the employment.

Its Example 6 is directly on point: a non-executive attending monthly board meetings at a banking group's London headquarters spends all or almost all of the time worked for that employer at a single workplace, so it is a permanent workplace and no relief for travel expenses is due. Home-to-board-meeting travel is commuting.

Where the directorship is genuinely held as part of a profession, HMRC treats certain travel payments or reimbursements incurred in an individual's capacity as a director of a professional practice as carrying no income tax liability, for expenses incurred on or after 6 April 2014.
Travel onward to another site for a task of limited duration can still be travel to a temporary workplace.
The US analysis is separate: Schedule C income carries business expense rules, not the UK's travel tests, so the two answers on one airfare can differ.

The US-resident non-executive who visits twice a year

This case surprises people most, and it has two independent answers.

On income tax, the treaty has a dedicated provision. Article 15 (Directors' fees) of the 2001 convention provides that directors' fees and other similar payments derived by a resident of a Contracting State for services rendered in the other Contracting State in his capacity as a member of the board of directors of a company that is a resident of the other Contracting State may be taxed in that other State. It sits beside, not inside, Article 14 on income from employment and its short-stay conditions, so the instinct that a handful of days cannot create a UK charge comes from the wrong article - though the text turns on services rendered in the other State, so where meetings are held matters. HMRC adds that a non-resident director is chargeable under section 27 on general earnings from duties performed in the United Kingdom.

On National Insurance there is a concession, and Americans cannot use it. HMRC grants relief where the director comes from a country which does not have a social security agreement with the UK, the only UK work is attending board meetings, and the director attends no more than 10 board meetings in a tax year with each visit lasting no more than 2 nights, or a single meeting lasting no more than 2 weeks. The manual adds that where the director is within scope of an agreement the UK has with another country, the concession will not apply. The US has one - so a US-resident non-executive falls outside it and back onto the agreement's own rules, the opposite of the intuitive result.

How we work on these

Board appointments are agreed quickly, by people not thinking about payroll, and the characterisation ends up settled by default. The work is to settle it before the first fee is paid: whether PAYE and Class 1 must be operated, whether any company-receipt route is genuinely available, which country's social security system applies and what certificate evidences it, and how the UK tax will be credited in the US. Our US-UK expat tax service is built for exactly this, and the analysis for a partner in a UK professional firm is a close cousin - see UK LLP partners who are US citizens.

A licensed CPA or Enrolled Agent reviews and signs off every US filing; the UK side is reviewed by an ACCA-qualified accountant. If a board seat has been offered, or one is already generating fees that nobody has characterised, book a confidential consultation.

This article is general information, not tax or legal advice, and does not create a professional relationship. The treatment of directors' fees is highly fact-dependent and the rules change; rates, thresholds and concessions should be confirmed against current official guidance before you act.

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Reviewed by a CPA / Enrolled Agent. Last updated: 19 September 2026.

Frequently asked questions

Can I invoice my UK non-executive director fees through my own limited company?+

Usually not, if the aim is to take the fee out of PAYE. HMRC's starting point is that a directorship is an office and that fees received in respect of work carried out as a director are in strictness assessable on the director as employment income, with tax deducted under PAYE by the company with which the office is held. There is a statutory route, now in section 6(5) ITEPA and replacing an earlier extra-statutory concession, by which fees can be taxed as a company's income instead. But HMRC's conditions require that the director was appointed by a company other than the paying company, that the appointing company's profits are within the charge to income tax, and that by agreement the director must account to it for the fees - plus either that the appointing company had the right to appoint the director by virtue of its shareholding in, or agreement with, the paying company, or that the company is not one the director or a connected person controls. A personal service company typically fails both of those final limbs: it has no right to appoint, and the individual controls it. The National Insurance regulations take a similar shape. Some arrangements do qualify, particularly genu

Why does the UK charge National Insurance on my board fees when I am not an employee?+

Because National Insurance follows the office, not an employment contract. HMRC states that a company director holds an office and that any earnings arising from a directorship are chargeable as employment income and subject to Class 1 NICs. Directors are also treated differently from ordinary employees in how the charge is computed. GOV.UK explains that contributions are worked out from directors' annual earnings rather than from what they earn in each pay period, using either a cumulative method recalculated each time the director is paid or an alternative method with a year-end reconciliation. For a non-executive paid quarterly or irregularly, that annual earnings period means separate fees are pulled together rather than each being measured against a fresh threshold, which can change the result significantly, and appointment part-way through a year has its own rules. There is also a nuance for directors of companies outside sections 1 and 1043 of the Companies Act 2006, who do not have an annual earnings period. Current rates and thresholds are published on GOV.UK and change each tax year, so they should be confirmed rather than carried over from last year's model.

Are UK director fees self-employment income for US tax purposes?+

That is the IRS's stated starting point. Publication 525, under the heading for fees for services, says that corporate director fees are self-employment income and that these payments are reported on Schedule C (Form 1040). Self-employment tax follows: the IRS requires Schedule SE (Form 1040) where net earnings from self-employment were $400 or more, and notes that the rules apply no matter how old you are and even where the individual is already receiving Social Security or Medicare. It remains fact-dependent. Whether a specific UK board fee constitutes net earnings from self-employment for a particular US person depends on the trade or business that person carries on, how the role is contracted and paid, and what else they do in the year. What does not change the analysis by itself is the UK's treatment: the fact that PAYE and Class 1 National Insurance were deducted in the UK does not convert the payment into wages for US purposes. The two systems characterise the same payment independently, which is exactly why the interaction has to be worked through rather than assumed to cancel out.

Will I pay National Insurance in the UK and self-employment tax in the US on the same fee?+

You can, and that is the central risk in this area. The income tax treaty does not solve it, because social security charges are not income taxes. The instrument is the US-UK social security agreement. GOV.UK's NI38 guidance lists the countries with a social security agreement with the UK and the USA is on that list, and the IRS describes such agreements as existing for the purpose of avoiding double taxation of income with respect to social security taxes, and as determining whether an individual is subject to US Social Security and Medicare tax or to the foreign country's system. The practical step is a certificate of coverage. To establish that self-employment income is subject only to foreign social security taxes and exempt from US self-employment tax, the IRS directs you to request a certificate of coverage from the appropriate agency of the foreign country and attach a photocopy to Form 1040 for each year you are exempt. In the other direction, HMRC issues a certificate confirming you pay only UK National Insurance while working in an agreement country. Which system applies is decided by the agreement rather than by preference, so the certificate should be obtained before th

Which foreign tax credit basket does UK tax on director fees fall into?+

Generally the general category. The instructions to Form 1116 describe general category income as including wages, salary and overseas allowances of an individual as an employee, and income earned in the active conduct of a trade or business, while passive category income covers dividends, interest, royalties, rents and similar returns. A board fee is employment income under the UK analysis and trade or business income under the US analysis, and both descriptions point to the general category rather than the passive one. That is usually the more useful outcome, because UK tax on the fee can then sit alongside UK tax on other general category earnings within a single limitation. The limitation itself still applies: IRS Topic 856 states that the credit is the smaller of the foreign tax paid or accrued or the US tax attributable to your foreign source income, and that unused foreign tax can be carried back one year and carried forward 10 years. Note too that the saving clause in Article 1(4) of the 2001 convention allows a Contracting State to tax its citizens as if the convention had not come into effect, so for a US citizen relief comes through the credit rather than through treaty

I live in the US and attend two UK board meetings a year. Am I really inside the UK system?+

Possibly on both counts, and the two answers are reached separately. On income tax, the 2001 UK-USA convention contains Article 15 on directors' fees, providing that directors' fees and other similar payments derived by a resident of one Contracting State for services rendered in the other Contracting State in his capacity as a member of the board of directors of a company that is a resident of that other State may be taxed in that other State. That is a different provision from Article 14 on income from employment and its short-stay conditions, so the assumption that a few days cannot create a UK charge is drawn from the wrong article - although the text does turn on services rendered in the other State, so the location of the meetings is part of the analysis. HMRC separately states that a non-resident director is chargeable under section 27 on general earnings from duties performed in the United Kingdom. On National Insurance, HMRC's concession for non-resident directors attending a small number of board meetings applies only where the director comes from a country which does not have a social security agreement with the UK, and the manual says the concession will not apply where

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