How to pay yourself from a limited company: salary, dividends and loans

You can take money out of a limited company as salary, as dividends, or as repayment of money you have put in. Anything else you take out is a director’s loan. GOV.UK says how you do it depends on what the money is for and how much you take.

The company’s money belongs to the company, which is why you cannot simply move it to your own account and treat it as yours. Each route has its own paperwork and its own tax, and the table below sets them side by side.

Salary goes through payroll, dividends come out of profit, and a loan is money you must record and may have to repay.

To pay yourself a salary the company must register as an employer and run payroll. GOV.UK says the company must take Income Tax and National Insurance contributions from your pay and send them to HMRC, along with employer’s National Insurance.

For the 2026 to 2027 tax year GOV.UK gives these Class 1 National Insurance thresholds, which sit alongside the Income Tax Personal Allowance:

Employees in category A pay 0% between the lower earnings limit and the primary threshold, 8% from there to the upper earnings limit and 2% above it. Employment Allowance can reduce an employer’s National Insurance bill by up to £10,500 for 2026 to 2027. GOV.UK says that if a company has only one director, that director must not be the only employee liable for secondary Class 1 National Insurance, so a one-person company may not qualify.

A salary is a business cost, so it reduces the company’s profit for Corporation Tax. That is a feature of the arithmetic, not advice on what to pay: your accountant can model it. Our guide on how to pay Corporation Tax covers the company side.

A dividend is a payment a company can make to its shareholders if it has made a profit. The company must not pay out more in dividends than its available profits from current and previous financial years, and it usually has to pay all shareholders.

• Hold a directors’ meeting to declare the dividend, and keep minutes even if you are the only director.
• Write a dividend voucher for each payment and keep a copy.
• Remember dividends are not a business cost, so they do not reduce the company’s Corporation Tax.

On your side, the first £500 of dividends each year falls within the dividend allowance, and the rest is taxed at 10.75%, 35.75% or 39.35% depending on your band, as of October 2026. The full detail is in our guide to dividend tax.

You can, but it is then a director’s loan, not pay. GOV.UK says if you take more money out of a company than you have put in, and it is not salary or dividend, it is called a director’s loan, and you must keep a record of it.

The company may have to pay tax on a loan to a shareholder-director that is not repaid within nine months of the end of its Corporation Tax accounting period, and other tax can apply if the loan is large or written off. We cover the rules and the traps in director’s loan accounts explained.

Many owner-managed companies use some combination of salary and dividends, but the right split depends on the company’s profit, your other income and your own tax position. There is no single correct answer, which is why it is an accountant’s question.

Things worth working through with an accountant before you decide:

• How much profit the company will really have after Corporation Tax.
• Whether the company can claim Employment Allowance.
• Your other income, since it sets your Income Tax band for dividends.
• Whether you will need to take funding from lenders, which can affect how much cash you want to leave in the company.

Business expenses the company reimburses are not pay, but GOV.UK groups salary, expenses and benefits together: if the company pays any of them it must be registered as an employer. If you or an employee personally use something that belongs to the business, it must be reported as a benefit and any tax due paid.

Keep receipts and a clear note of what each payment was for. Personal spending out of the company account is not an expense, and it ends up in the director’s loan account.

Keep a payroll record for salary, a minute and voucher for every dividend, and a director’s loan account for anything else. Missing paperwork is the commonest way a straightforward payment turns into a tax question.

• Paying a dividend before checking there is enough profit to cover it.
• Withdrawing cash with no record, which leaves an undocumented director’s loan.
• Forgetting that you may need to report dividends to HMRC, usually by 5 October after the tax year, if you owe tax on them.
• Leaving the tax for money taken out until the bill arrives instead of setting it aside.

A rolling cash flow forecast helps you see what the company can afford to pay out without running short for tax, payroll or loan repayments.

Capzy is a credit broker, not a lender, and is paid by the lender. We do not advise on how directors should pay themselves; that is for your accountant. What we can do is help when the company itself needs funding.

You can check your funding options with a soft search that does not affect your credit score. A full application to a lender may involve a hard search, and any offer is subject to status and lender criteria. If you are weighing finance, our business finance guides explain the main products.