How to pay yourself from a limited company

• Salary (PAYE): deductible for Corporation Tax, but attracts income tax and National Insurance above the thresholds. A small salary protects your State Pension and uses your personal allowance.
• Dividends: paid from post-tax profit, no National Insurance, taxed at lower dividend rates — the main top-up for most owner-managers.
• Pension contributions: employer contributions are deductible, carry no NI and aren’t taxed as income now — often the most efficient route of all.
• Expenses: genuine business costs reimbursed to you, tax-free.
• Director’s loan: borrowing from the company — useful short-term, but an overdrawn loan brings the S455 charge if not repaid in time.

For most owner-managed companies it’s small salary + dividends + pension: a salary around the personal allowance or NI threshold, dividends for the money you need to live on, and employer pension contributions for surplus you don’t need today. The exact split depends on your profits, other income and NI position — and the dividend tax rise from April 2026 has narrowed some of the gaps, so it’s worth re-checking each year.

The company is a separate legal person, so you can only extract money through the proper routes, documented at the time: dividends need board minutes and vouchers and must come from distributable profits; salary needs payroll and RTI. Taking cash ad hoc lands in your director’s loan account and creates tax problems.

The director’s loan trap →

We model the salary/dividend/pension mix for your figures — before year end, while you can still act — and handle the payroll, dividend paperwork and tax. Call 0114 327 1480.

Director Self Assessment →