How do I pay myself as a limited company director?

Most directors take a small salary, commonly £12,570 (the personal allowance), plus dividends from the company's profit after Corporation Tax. The salary is deductible for the company and uses your tax-free allowance; dividends carry no National Insurance and are taxed at lower rates than salary (8.75%, 33.75% or 39.35%).

Many single-director companies take £12,570, the personal allowance, which attracts no income tax and is a deductible company expense. The exact optimum depends on Employment Allowance and your other income.

For the slice above the personal allowance, dividends are usually more efficient because they carry no National Insurance and are taxed at lower rates than salary. A combination of a small salary plus dividends is the common approach.

You can, but a small salary preserves your National Insurance record for the state pension and lets the company deduct the salary cost. Most directors take at least a modest salary for that reason.