Your Ltd invoices clients, money comes into the company account… but that money isn’t yours yet. Your company and you are separate legal entities. To pay yourself, there are two main routes: salary and dividends. Most directors use a combination of both.
Route 1: salary as director
- What it is: the company pays you a salary for your work as director
- How it works: requires the company to be registered as an employer on HMRC’s PAYE system and to report each payment
- Advantage: salary is a deductible business expense — it reduces the profit on which the company pays Corporation Tax
- Important if you don’t live in the UK: where that salary is taxed depends on your tax residence and double taxation treaties — you absolutely need professional advice here
Route 2: dividends
- What it is: distribution of company profits among shareholders
- Golden rule: you can only pay dividends if there are profits remaining after tax. Paying dividends without profits is illegal (unlawful dividend)
- Formality: each distribution must be approved and documented with a board resolution and a dividend voucher — always keep these
- Tax treatment: dividends are not a deductible business expense for the company; you declare them as personal income in your country of tax residence
The mistakes we see every week
- Using the company card for personal expenses: that’s not paying yourself, it’s a director’s loan from the company to you with tax consequences
- Paying dividends «on the fly» without checking there’s actual profit after Corporation Tax
- Not documenting anything: without resolutions and vouchers, HMRC can reclassify the payments
💡 Tip: always keep your company account and personal account separate, and make labelled transfers («salary March», «dividend Q1»). Your accounts — and your accountant — will thank you.
Track your company’s income and expenses from your dashboard at startup.aiden.es, and if you have questions about your situation, contact support.
⚖️ This guide is informational only and does not replace professional tax or legal advice. For your specific situation, consult an accountant or tax advisor.