• Luke Malone

How do I pay myself as a limited director?

Updated: Apr 7

I am often asked how do I or how should I pay myself?

In 2022 there are some considerable changes to each allowance and a new tax!!

If you are a ltd company owner/director - Below are the most tax efficient ways you can start paying yourself, as with all things accounts related there are slight nuances and it is best to seek guidance from your accountant if unsure.

1) £9,100 salary (tax-efficient, no NI admin)

  • At this salary level there is very little admin involved

  • There will be no income tax, Employers or Employee NI payable at all

  • Please note: This salary level is above the Lower Earnings Limit for National Insurance required, in order to qualify for state benefits (the limit is the same as last year £120 per week / £6,396 per year)

2) £11,908 salary (slightly more tax-efficient, some NI admin)

  • This year this is the most tax efficient way to pay yourself if you are a sole director

  • There is a small tax advantage to taking a £11,908 salary compared to £9,100 of £191.21

  • You pay £422.60 in Employers NIC however this is tax deductible of course

  • There may be some admin costs associated with accounting for Employers’ NICs at this salary level; it depends on your own circumstances e.g. an established monthly accountant

3) £12,570 salary (This is the most tax-efficient if you have 2+ employees)

  • You must claim employment allowance to benefit from this find out more about the EA and see a calculation here

  • The EA will refund any Employers’ NICs your company pays, up to a maximum of £5,000.

  • You can go back 4 years to claim on any EA you were entitled to

  • You will make a tax saving of £659.30 compared to the £9,100 salary above

Do you know about Dividends?

After you have decided upon the right salary level to pay yourself (and any employees) during the tax year, any remaining profits can be distributed to the company’s shareholders in the form of dividends, which are taxed as follows:

  • 8.75% (basic rate)

  • 33.75% (higher rate)

  • 39.35% (additional rate)

There is also a £2,000 dividend allowance which sits within your existing tax bands.

Dividends are taxed as the ‘top slice’ of income, so after you have taken into account your salary, and any other earnings and investment income.


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