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How Do I Pay Myself as a Director of a Limited Company?
A limited company director can take money from the company in a few different ways. The two most common are a salary through PAYE and dividends from company profits. Many directors use a mix of both. Pension contributions, director's loans and reimbursed expenses are other routes. Each is taxed differently, so it helps to know how they work before you decide.
Key Takeaways
- A director can be paid through a PAYE salary, dividends, or a mix of the two.
- A salary is taxed as income and is a business expense, so it reduces the company's Corporation Tax. Dividends are paid from profits after Corporation Tax.
- Dividends can only be paid from profits the company has available to distribute.
- Pension contributions, director's loans and expenses follow their own rules.
- The right approach depends on your circumstances, so it's worth speaking to an accountant.
What Are the Main Ways to Pay Yourself?
Your company and you are separate, so you can't simply take money out of the business account. Whatever you take has to be paid in a recognised way.
| Method | Taxed as | Reduces Corporation Tax? | National Insurance? |
| PAYE salary | Income tax | Yes, it's a business expense | Yes |
| Dividends | Dividend tax | No, paid from profits after tax | No |
There's no legal requirement to pay yourself a salary. But if you only take dividends, you won't build up a National Insurance record from them. A salary above the lower earnings limit can count towards your State Pension record.
How Does a PAYE Salary Work?
A salary is paid through payroll, with income tax and National Insurance taken off. Because it's a cost of running the business, it reduces the profit your company pays Corporation Tax on.
Here are the 2026/27 figures that usually come into play:
- Personal allowance: £12,570
- Lower earnings limit: £6,708 a year
- Employee National Insurance: 8% on earnings between £12,570 and £50,270
- Employer National Insurance: 15% on earnings above £5,000
The personal allowance has been frozen since April 2022 and is due to stay at this level until 2031.
How Do Dividends Work?
Dividends are a share of the company's profits paid out to shareholders. They come from profit after Corporation Tax, so the company can't deduct them. No National Insurance is due on them, but they are taxed on your personal tax return.
For 2026/27:
- Dividend allowance: £500
- Basic rate: 10.75%
- Higher rate: 35.75%
- Additional rate: 39.35%
These rates apply to dividend income above the allowance.
Dividends come with some paperwork. For each payment, hold a directors' meeting, record minutes, and issue a dividend voucher. If you want to understand the basics first, our guide to what a dividend is is a good starting point.
If a company pays a dividend when it doesn't have the profits to support it, the dividend is unlawful. The money then counts as a debt you owe back to the company.
Can I Combine a Salary and Dividends?
Yes, and many directors do. A common pattern is a modest salary, often set around the personal allowance, topped up with dividends. It's a description of what people do, not a recommendation, and the mix that suits one director may not suit another.
For a closer look at how the numbers compare, see our guide on director salary and dividends. Our shorter overview of how to pay yourself from a limited company covers the basics.
What Other Ways Can I Take Value From My Company?
Pension contributions. Employer contributions to a pension are a tax-deductible business expense and don't attract National Insurance.
Director's loans. A director can borrow from the company, but there are rules. Loans over £10,000 can create a benefit in kind. If a loan isn't repaid within nine months of the end of the company's accounting year, the company faces a tax charge.
Expenses. Genuine business expenses that the company reimburses aren't taxable income, as long as you keep records.
What Should I Do Next?
Talk to an accountant about what fits your situation, and check current rates on GOV.UK, since figures can change each tax year. If you haven't set up yet, you can compare our company formation packages or visit our homepage to see everything we offer.
FAQs
Do I have to pay myself a salary as a director?
No, there's no legal requirement. If you only take dividends, though, you won't build a National Insurance record from them.
Can I pay myself dividends if the company made a loss?
Dividends can only be paid from available profits. If they aren't, the payment is unlawful and counts as a debt owed back to the company.
Is a director's salary tax deductible for the company?
Yes. It's a business expense, so it reduces the company's Corporation Tax.
Are dividends subject to National Insurance?
No. They are taxed as dividend income instead.
What paperwork do I need for a dividend?
A directors' meeting, minutes, and a dividend voucher for each payment.
What is the dividend allowance for 2026/27?
£500. Dividend income above that is taxed at 10.75%, 35.75% or 39.35%, depending on your tax band.
Should I speak to an accountant?
It's a good idea. The right approach depends on your personal circumstances.
This article is for general information only and does not constitute legal, tax or financial advice. Figures are for the 2026/27 tax year and can change, so please check GOV.UK or speak to a qualified accountant before making decisions.
