💼 How to Pay Yourself as a Director of a Limited Company – Salary vs Dividends

If you run a limited company, you’ve got flexibility in how you take money out. The two main ways are salary and dividends, and the right mix can make a big difference to your tax bill.

Here’s a quick breakdown 👇

💷 Salary

✅ Counts as an allowable business expense (reduces Corporation Tax).

✅ Builds entitlement to state pension & benefits (if above NIC threshold).

❌ Subject to Income Tax & National Insurance.

📈 Dividends

✅ Usually more tax-efficient (lower tax rates vs salary).

✅ No National Insurance payable.

❌ Paid only from post-tax profits (after Corporation Tax).

❌ No pension/benefit contributions.

⚖️ What many directors do

A common approach is to take a small salary (enough to stay in the NI system but under higher tax thresholds) and then top up with dividends.

⚠️ Remember: HMRC rules are strict – you can only pay dividends if your company has sufficient post-tax profits.

💡 Tip: The right mix depends on your business profits, personal circumstances, and future plans. Always get tailored advice before making decisions.

👉 Directors – do you prefer a low salary/high dividend mix, or something more balanced?

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