How do I pay myself a salary?

Jordan Macey

September 3, 2021

How do I pay myself a salary? guide
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Small Business Accounting

As the director of a limited company, you may also be classed as an employee. As such, you may pay yourself a salary through the PAYE scheme—which is similar to how other employees of the company receive their pay.

You’ll need to register as an employer with HMRC (even if you’re the sole director of a limited company, and are only employing yourself), set up and run payroll, report to HMRC and abide by HMRC’s record keeping requirements.

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How do I pay an employee? Guide

How do I pay an employee?

If you're paying an employee for the first time, you'll need to set up payroll. You need to take the following steps:

  1. Register as an employer with HM Revenue and Customs (HMRC) and get a login for PAYE Online.
  2. Choose payroll software to record employee's details, calculate pay and deductions, and report to HMRC.
  3. Collect and keep records.
  4. Tell HMRC about your employees.
  5. Record pay, make deductions and report to HMRC on or before the first payday.
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What is the optimal salary for a Company Director? Guide

What is the optimal salary for a Company Director?

The optimum salary for a contractor to pay themselves in the current tax year is dependent on their overall income throughout the period.

In the instance there is no other income to be considered, it is generally recommended that salary is paid in line with the Secondary National Insurance threshold which is currently £732 per month (20/21).

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What do I need to do to pay a dividend? Guide

What do I need to do to pay a dividend?

To pay a dividend, you need to:

  • Hold a directors' meeting to ‚Äòdeclare' the dividend.
  • Keep minutes of the meeting, even if you're the only director. For smaller companies, this may often be just a case of getting the paperwork completed.
  • Issue dividend vouchers.
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How/ when do I pay myself Dividends? Guide

How/ when do I pay myself Dividends?

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How should I pay overseas supplier?

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How do I pay myself as a contractor?

A contractor working through their own limited company can pay themselves through a couple of ways such as paying a salary and paying dividends. There are a few factors that need to be considered when deciding the best way to go about this.

For example, when operating inside IR35, contractors will be restricted to paying themselves a salary however when operating outside IR35 the doors are opened to maximise tax efficiencies.

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How do I pay myself through a Limited Company? Guide

How do I pay myself through a Limited Company?

As a limited company director, you can pay yourself through:

1. Taking a salary

As the director of a limited company, you're also considered an employee. As such, any salary you draw will be paid through the PAYE scheme-similar to how other employees of the company will receive their pay.

You'll run a payroll, report to HMRC and receive your salary (after taxes have been deducted at source).

2. Dividends

A dividend is a payment of profit that a limited company distributes to its shareholders.

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How do I pay a Limited Company Pension? Guide

How do I pay a Limited Company Pension?

If you're operating as a sole trader, you can contribute to a personal pension scheme.

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What are Unallocated Payments? Guide

What are Unallocated Payments?

Unallocated payments are where the client has given you more money than they owe.

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What is a directors loan account? Guide

What is a directors loan account?

As a limited company director, you can access the money in your company bank account through a facility known as a director's loan.

This can come in handy in instances when your personal finances are in need of a boost, yet taking out a director's loan is a decision that requires careful consideration. That's because there are tax and accounting implications, and it's best to speak to an accountant so that you fully understand the consequences.

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How do I pay myself dividends? Guide

How do I pay myself dividends?

To pay a dividend, you need to:

  • Hold a directors' meeting to ‚Äòdeclare' the dividend.
  • Keep minutes of the meeting, even if you're the only director. For smaller companies, this may often be just a case of getting the paperwork completed.
  • Issue dividend vouchers.
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Take Home Pay Calculator: Limited Company outside IR35 Guide

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What are Directors Loans? Guide

What are Directors Loans?

A director's loan is defined as money taken from your company that isn't either of the following:

  • A salary, dividend or expense treatment
  • Money that you've previously paid into or loaned the company

A Director's Loan Account (DLA) is a record of all transactions between the company and its directors. It records not just the money owed by the directors, but also the money owed to them.

Director's loans can be used:

  • when you need to access money in your company-apart from what you take out as a salary, dividend or expense treatment-for personal reasons.
  • for a variety of purposes, such as covering the costs of a home repair bill, travel plans or any unforeseen personal expenses that may arise.
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When do I have to pay National Insurance? Guide

When do I have to pay National Insurance?

For employers, the deadline for paying National Insurance will vary depending on the amount payable.

If the amount payable exceeds £1,500, the deadline will fall on the 22nd of the month (or the 19th if payment is made by post).

If the amount payable falls below £1,500, you can make quarterly payments instead of monthly ones. The quarters end on 5 July, 5 October, 5 January and 5 April, and payments are due on the 22nd of the month (or 19th is payment is made by post). For example, for the quarter ending 5 July, the payment must be made by 22 July.

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What are Director's withdrawals? Guide

What are Director's withdrawals?

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How do I pay national insurance? Guide

How do I pay national insurance?

How you pay your National Insurance contributions depends on your employment status.

If you're an employee, your National Insurance contributions are deducted from your wages before you receive your salary. Your contributions are reflected in your payslip.

If you're a limited company director, you may also be an employee (at your own company). As such, you pay Class 1 National Insurance through your PAYE payroll.

If you're self-employed, you pay Class 2 and Class 4 National Insurance depending on your profits. The majority of self-employed workers pay National Insurance through Self Assessment.

If you're employed and self-employed, your Class 1 National Insurance will be deducted through your wages. You may also need to pay Class 2 and Class 4 National Insurance depending on your self-employed profits.

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Contractors - should I be paying myself salary and dividends? Guide

Contractors - should I be paying myself salary and dividends?

As a contractor, how you pay yourself will vary depending on whether your contract is subject to IR35.

  • Contract subject to IR35 (inside): Salary
  • Contract not subject to IR35 (outside): Salary, dividends + reimbursing any expenses you have paid for out of your own pocket

We've provided a more detailed explanation in our Forma Help Center resource.

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