In short: Start with the monthly amount you need personally, then choose between salary, dividends and a director's loan to reach it. The right mix depends on that figure and on what the company can pay.
The simplest way for a director to decide how much to pay themselves is to work backwards from the number you actually need.
That number is what you need personally each month. With it fixed, choosing between the routes HMRC's guidance describes for taking money out of a company becomes a calculation with a known target.
What are the ways to take money out of a limited company?
Once you know your monthly figure, you can work out the right strategy to get it out of the business, whether that's:
- Salary - tax deductible for the company, but comes with Income Tax and NIC for you personally
- Dividends - paid out of distributable reserves, taxed at dividend rates, but no NIC
- Director's loan account - a short-term way to access funds, but one that needs managing carefully to avoid a benefit-in-kind or s455 tax charge
HMRC's guidance on running a limited company describes the same three routes. To pay a salary the company must be registered as an employer, take Income Tax and National Insurance contributions from the payments and pay them to HMRC along with employers' National Insurance. A dividend is a payment a company can make to shareholders if it has made a profit. Money you take out that is neither salary nor dividend, and is more than you have put in, is a director's loan.
Why does the amount you need change the strategy?
The right mix depends entirely on the number.
Someone who needs £10k a month to live on is going to need a very different extraction strategy to someone who only needs £2k a month, in terms of tax efficiency, timing, and what the business can actually support.
The published bands show why. For 2026 to 2027 the basic rate band runs to £50,270, and dividends above the £500 allowance are taxed at 10.75% in that band and 35.75% in the higher rate band. £2k a month is £24,000 a year, which leaves room inside the basic rate band. £10k a month is £120,000 a year before any tax is added on top, which is past the higher rate threshold and past £100,000, where HMRC's guidance says the Personal Allowance goes down by £1 for every £2 of income.
What limits how much the business can pay you?
Dividends have a ceiling. HMRC's guidance says your company must not pay out more in dividends than its available profits from current and previous financial years. Each dividend also needs a directors' meeting to declare it, minutes of that meeting even if you are the only director, and a dividend voucher.
A director's loan has a clock on it. If you owe your company more than £10,000 at any time in the year, HMRC's guidance is that the company must treat the loan as a benefit in kind. If the loan is not repaid within 9 months of the end of the Corporation Tax accounting period, the company pays Corporation Tax on the outstanding amount, which it can reclaim once the loan is repaid.
Profit and cash in the bank are not the same thing, which is the subject of unpaid invoices: profit on paper, no cash.
What should you work out first?
Work out the number first. The strategy follows from that, not the other way round.
Once you have the figure, how much a founder should pay themselves goes through the salary and dividend mix.
Tax rates, thresholds and the rules on loans change, and the right route depends on your own income and your company's accounts, so this is general information rather than advice on your circumstances. To have your own figure worked through, see how we work or talk to us.
Common questions
HMRC's guidance says how you take money out depends on what it is for and how much you take. It covers salary, expenses and benefits paid through payroll, dividends paid to shareholders from profit, and directors' loans. See [Taking money out of a limited company](https://www.gov.uk/running-a-limited-company/taking-money-out-of-a-limited-company).
HMRC's guidance describes a dividend as a payment a company can make to 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. See [Taking money out of a limited company](https://www.gov.uk/running-a-limited-company/taking-money-out-of-a-limited-company).
A director's loan is money you or close family members get from your company that is not a salary, dividend or expense repayment, and not money you have previously paid into or loaned the company. You must keep a record of what you borrow or pay in, and that record is usually known as a director's loan account. See [Director's loans](https://www.gov.uk/directors-loans).
You must hold a directors' meeting to declare the dividend and keep minutes, even if you are the only director. For each payment the company must write up a dividend voucher showing the date, company name, shareholder names and amount. See [Taking money out of a limited company](https://www.gov.uk/running-a-limited-company/taking-money-out-of-a-limited-company).
Related reading
Simon Jacobs is a Chartered Tax Adviser (CTA · ACA) and PwC trained, founder of SRJ International. He advises UK business owners on tax, profit extraction and exit. Read his full profile →