How to Pay Yourself as a Ltd Company UK | BEST Directors Salary 2024/2025 (Dividends vs Salary)

[@HonestMoney]

▶ Follow me on Twitter: twitter.com/darrenthedegen ▶ Allowable Business Expenses: kzbin.info/www/bejne/bmHahn2QhtafitU ▶ The 60% Tax Trap: kzbin.info/www/bejne/opOvaqVtl7Njbbs ▶ 10 x ADVANTAGES of a Limited Company: kzbin.info/www/bejne/gX2vfKioeLOlmMk

[@nicolasbenson009]

I like investing in close-end funds that pay monthly dividends. The trick is to hold long term and reinvest the monthly dividends plus buy more shares on a monthly basis or when ever you can afford to. This can be easily done because close-end funds are bought and sold on the stock market just like regular stock. That’d be enough to create a portfolio that would pay you between $50k to $70k in dividend income

[@berniceburgos-]

Just because there are opportunities in the market doesn’t mean you should go in blindly. To understand the potential factors that contribute to your financial growth, I'll advise you to seek the help of a professional

[@tatianastarcic]

I completely agree; I am 60 years old, recently retired, and have approximately $1,250,000 in external retirement funds. I am debt free and have very little money in retirement funds compared to the total value of my portfolio over the past three years. To be honest, having a portfolio-advisor for investing is genius!

[@Michaelparker12]

As a new investor it's always great to hear from a person who has gone through all the difficult times and come ahead of it. What are some strategies i can employ to be successful?

[@tatianastarcic]

Well, there are a few out there who know what they are doing. I tried a few in the past years, but I’ve been with Melissa Terri Swayne for the last five years or so, and her returns have been pretty much amazing.

[@BridgetMiller-]

I copied her whole name and pasted it into my browser; her website appeared immediately, and her qualifications are excellent; thank you for sharing.

[@simplydividends]

Some examples would have been helpful. Comparing 50k standard salary against 50k through low salary, dividends and corporation tax

[@user-lx6pk9os2d]

The real answer is - it depends on your circumstances. For example - I pay myself, my wife and my daughter £750 a month - all of which goes into the "family pot" from which all the household bills are paid. This means we pay no tax or NI - but gain NI credits. We also claim our mileage which gives us all up to an additional £4500 a year tax free. All profit from the company is paid into our pensions - hence no corporation tax. Clearly, this setup wot't last forever - but at present it really suits us. It's also going to set my daughter up with a strong pension pot at the start of her working life.

[@user-lx6pk9os2d]

@@rjj00 Perfectly legal. So why wouldn't you?

[@rjj00]

@@user-lx6pk9os2d What Jimmy carr did was legal , doesn't make it moral

[@kgill99]

Pay to wife+daughter only legal if your wife and daughter have legitimate roles in the business, not sham roles or exaggerated roles Only legal if your mileage is business related Only legal up to pension limit, I think 40k per year and again only legal if your wife and daughter have legitimate roles in the business.

[@rjj00]

^ what he said ✅

[@davestevenson9080]

how old is your daughter? pensions won't exist in 20 years lol, the country is slowly collapsing

[@JD-mw8ob]

Thank you. It would be good to hear a similar video but for those circumstances where an individual runs a Ltd Company where they are retired and drawing a pension or where they work along side their Ltd Co in another paid job outside the company . ? Bw

[@ismellofmusk]

Can you do some examples of how it looks at say. 50k Dividends. 75k. 100k and £125k maybe £150k

[@JoshCarterWeb]

@HonestMoney this would be really interesting to see

[@hatterbez2943]

There's loads of ways of saving huge tax but it depends how much admin you wanna do! Don't let the anti business tory scum have the tax money though, so to save any tax all up for!

[@robkgilchrist]

@@JoshCarterWeb @HonestMoney, agree this would be really interesting to see

[@gnorweb7339]

At a profit before director's remuneration of £79k or above it becomes better to start taking more salary at the basic rate rather than pay marginal rate of corporation tax and basic rate tax on dividends. I hope that helps.

[@robbirkhead]

Agreed! Would like to see examples of most efficient ways to take home at those increasing director’s drawings amounts.

[@shaunjohnuk]

Yes, we need some examples on various salary's from low to high

[@michaels8638]

Perhaps do a video on setting up a registered charity as a subsidiary of your company, far more tax efficient and pay less tax in corporation tax.

[@MoneySuccesswithAndy]

That was really well explained, super clear excellent video. Thank you for posting.

[@joshanthony2679]

found this really easy to follow and understand. In the process of setting up a limited and most of the info our there is very confusing and quite daunting to say this least. Your video has given me a calmer piece of mind about doing it and now feel more comfortable when tackling the finances. It would be great if you could do an updated dividend video just incase anything has changed (watched your 2021 to get an idea of how it works!)

[@aspireconsultingandtrainin1896]

Fantastic and simple explanation, that not even my Accountant was able to explain to me on this in the way that you have!

[@marcus2118c]

Just started as a ltd company, this is so helpful. Cheers!

[@tylerfayosephotography]

great video, this is exactly what we did for 23/24,!!

[@CabinetFramingUK]

Well done. This is the real valuable info we subscribed for. Smart business guys end up showing their accountants a thing or two most times 👍

[@jordonleesmith5600]

Could you expand on this video to explain how this works when you still have a 9-5 salary + a director earning income from a Ltd. Surely my personal allowance would be used up already from the 9-5 salary, so would it be better to pay myself all earnings from the Ltd as a dividend and have no salary from the Ltd at all?

[@felawes]

The £758 is company specific. So you can have salaries from several companies. Just keep each one below £758. And if you don't control them you can also think about Employment Allowance which is £5,000pa.

[@nicholasbrandon8699]

This is a really good video - thanks for doing it and thankfully we are doing everything just right. However, it might be good to mention this. I am 56 so I can pay money into my personal pension which will reduce the net profit and therefore reduce our overall corporation tax liability. If I choose I can then withdraw 25% of any private pension (or contribution made) up to around £ 250k (can't remember the total). So doing this is very tax efficient to avoid paying more in CT and more in dividends that might take you into a higher tax bracket. Obviously, this approach has a finite life but definitely worth doing in my opinion - would be interested in your thoughts.

[@hairobinson]

I was looking forward for this video especially just after the budget .. Thank you as always

[@paddy_wax]

Im still not 100% clear as its all c9mpletely new to me but im a hell of a lot closer than i was before watching this video - thanks mate

[@Samxronn]

As you mentioned individuals/husband & wife I'd be interested to know when a ltd company becomes more tax efficient than a sole trader/partnership. As you're already paying corporation tax on almost all the income, regardless of the dividends structure it seems to never be more efficient to be a ltd company unless you're in the multiple hundreds of thousands.

[@Jonay1990]

Don't forget the Scottish income tax rates are different (not that it will make much difference to the outcome of this... but worth at least adding in... or at least highlighting that the income tax rates listed are for England/Wales/N.Ireland only)

[@mikeh9882]

Many thanks! These are a very useful and concise set of vids on Directors pay and dividends each year. But I'm struggling with employer pension contributions - I've made mistakes in previous years on this and the year end is looming! Thanks again

[@mikeh9882]

Just to add, I have made a significant employers contribution to my personal pension. Thanks

[@winjustin]

Thank you for making this video. Thank you also for showing the workings behind your figures. As others have mentioned, it would be of help if examples were included using different dividend levels. However , that is a fairly easy calcualation to do.

[@rampageashton]

Don't forget the magic of Director pension contributions for some more tax savings.

[@davidcollier6520]

Thanks for posting another great video.

[@MrGazzy]

Love these videos! Great to see you back making this content. The fact they keep lowering the dividend allowance really grinds my gears. Do you think they'll eventually wipe the tax-free dividend allowance completely?

[@simplydividends]

No, otherwise everyone would have to file a self assessment, even if you had a few quid in dividends from holding a tiny amount of stocks. Frankly the dividend allowance and capital gains thresholds have been cut to crazy lows.

[@MrGazzy]

@@simplydividends That makes sense. We’re constantly paying more and getting less in this country.

[@lwo7736]

This is so useful, thanks dude I've got 40k in my business bank account and I want to buy my first house without getting rinsed on tax!

[@wilsonproperty3320]

@honestmoney have you done any videos on how to make pension contributions from your Ltd company, a way to efficiently extract company funds into the directors pensions? Thanks in advance!

[@AM_o2000]

NB What with interest rates being higher now, it's worth bearing in mind that savings interest counts towards your personal allowance.

[@DanielHarrisCodes]

Can’t believe how much we’ve seen the dividend allowance fall over the years, easier than targeting the big companies though I suppose

[@counterleo]

They did bring the CT rate up to 25% for larger companies which is a step in the right direction, but I agree, they could have kept the dividend allowance at 2k at least

[@busymamatips1475]

I’d like to know how this fits if someone already has a part time job and opened a ltd company for side hustling.

[@UXClicks]

What if someone just started their company this year and no record of last year's earning - how will they pay themselves dividend ?

[@absabs3811]

If you have a directors loan account in the positive file a ct61 form and charge your company 9% interest on the money it owes you, the business pays the tax liability which is negated through corporation tax so tax free and far better returns than virtually anything i can think of.

[@gnorweb7339]

This is only correct only if your profit before tax (excluding directors remuneration) is less than £79k. When you have more profit before tax than £79k it would be better to draw a salary at the basic rate of income tax because otherwise you will hit the marginal rate of corporation tax. It is better to draw a salary at the basic rate, pay the income tax, employee's and employer's national insurance and shelter the corporation tax at the marginal rate and the basic rate tax on dividends.

[@HonestMoney]

Thank you for the suggestion, I'll take a look into that and see how the figures compare 👍

[@gnorweb7339]

​@@HonestMoney You're welcome. I'm sure if you look into it you will find that I am correct.

[@chrisriddell2800]

Just pay a lot more into your personal SIPP per year to offset some of those profits and reduce corp tax bill at year end

[@GeorgeT96]

Back to the normal videos lets goo! Good job

[@tomroberts3851]

Excellent video, thank you ❤

[@hhcollective]

Could you explain the £5000 employee/director allowance a touch better? How does it work when you try to claim this allowance and what did you mean by "used up by your employee"? How does the allowance get used up by a second director or employee?

[@MichaelVeazey]

Very very helpful advice!

[@Mr_Ali_G]

Was waiting for that

[@deemistri3599]

Thank you so much for posting this video. Very helpful indeed.

[@Shamele55]

Clear as mud. Would be more interesting to see actual examples at different earnings

[@chazprouk]

I agree with you but he’s done really well considering the U.K. tax system is completely broken and inefficient.

[@nicholasupson6779]

It’s not that hard. 😂

[@stevewatt9477]

Very good presentation. I would just comment that if you wish to consider yourself receiving zero from the company as an 'officer' of the company, and hence an employee, but you are providing a service to the company via a fee (eg as an electrician), you could save £374 more per year by not paying employer's NI. Also can save you running a payroll with all the returns to make. If you are really worried about IR35, which is not really a risk, you could bill a few clients via self-employment fees. Second comment: If you are above retirement age you should not be operating through a Ltd Co.

[@kgill99]

Why not for the second comment?

[@markk4863]

At 9:00, is it not the case that by paying the £9,100 directors salary, you can pay yourself a tax free dividend up to 12,570, so you’re not comparing 13.8% to 19%

[@ilonastezowska9498]

Great content, as always. Really helpful. Thank you!

[@Billy_Bull_Sheeter]

I want to start my own company. Is the best way to do a LTD company or a sole trader. And I want to pay as little tax as legally possible. Like the MPs do.

[@basicsurfer08]

i wonder if the £5k employment allowance can be claimed retrospectively?

[@robkgilchrist]

I found your video really interesting. If you pay yourself mainly by Dividends, does it mean you will end up with a large Corporation Tax bill? Salary is a business expense, so it reduces your CT. But if you reduce your salary, it means your profit will go up and the CT is calculated on that before the dividend is taken. I had thought you could put all your profit into a Pension contribution to reduce the CT but you need the profit to pay yourself dividends.

[@ArtursBondars]

Very helpful, thank you!

[@iw.blackwood]

If you own your own company and pay 25% corporation tax surely overall it’s better to pay your self a wage . Employers £5000 NI allowance solves that for a x2 director or employee setup . The full 25% reduction in corp tax from paying a full wage is substantial then fair enough your have to pay some extra tax and national insurance which amount to about 8% NI soon and income tax 20%- 8.5% dividend then your overall paying 5% less tax by taking a wage PLUS you can pay maximum pension same level as taxed salary , which doesn’t apply with the dividend route .

[@counterleo]

the video assume a 19% CT rate, not 25% if your business is doing well enough that you pay CT at 25%, congrats, but then you can probably hire an accountant

[@albert_zernoff]

Hi mate, thanks for your video and explanation. Could you please let me know if I have to pay corporation tax if I was registered as a subcontractor and my company (me) pays cis tax 20% ...? Thanks in advance

[@NoName-mq8cs]

Can you make a video on how to cash out and take profits in crypto especially as we are headed into a Bull Market!

[@suzyurch5927]

What about if you consider pensions? Because if I pay myself a salary through PAYE, I get government tax relief and I also get to claim employers contribution off corporation tax. If I just paid more into my pension myself from my dividend, would I lose out on those government and corp tax benefits?

[@SimWz]

What about IR35? I thought it was not possible

[@Bully000001]

This relies on having sufficient retained earnings to pay the dividends. If these are insufficient and reliance is on the profits emerging in the year payments have to be made by company loans. To be treated as a loan and not salary, interest needs to be charged on the loan at rates laid down by HMRC. Starts to get more complicated!!!

[@highgatehandyman6479]

Great info.

[@craigmunro2840]

Can you do similar one for Scotland tax system

[@mesieful]

Great video as usual. But I thought the NI reduced to 8% from 2024

[@hbreazy]

You missed out the dividend part

[@Ben_Chode_420]

Good video however you didnt consider Pension Contribution as a way to reduce Taxable Income. I personally dont see any advantage to be inside or outside IR35 if one contributes 60k per year in Pension. I could be missing a trick here though.

[@DreamhouseprojectHKW]

My wife is a soul director of a limited company but has income from another Job. I assume the optimum salary to pay as director would be what is left over from the tax free allowance of £12,570.. Any advice ?

[@geralddavison]

What about occupational pension contributions. If you pay yourself a salary, subject to NI and PAYE, but pay some of that into a pension, you would be entitled to income tax relief on the pension payment. If you wish to maximise your pension contributions is it better to pay a salary, then claim income tax relief or pay as dividends and then pay into the pension without income tax relief? For example pay a salary of £30,000 then pay £17,430 (30,000-12,570) into your pension, getting 20% relief. You'd pay more in NI (Employee and Employer), but avoid Dividend tax. I'm probably making some horrible error in my "logic" 🙂

[@1evilpie]

Any pension contributions should be made direct from the Ltd in to your pension to maximise tax efficiency. Don't pay yourself and then make the contribution out of your taxed money. The tax relief you get back isn't as good as just paying it direct.

[@BMOzzie]

Better content

[@ru.london]

Good morning. Sorry can't find your name :) Can be paying pension affect your calculation? Thank you. Ivan.

[@Boneamps]

If you are only yourself, but want to use the advatage of a Sole director and sole employer (being 2 different people) is it allowed to add an accountant of legal representative as director? I am wondering if it would be possible/allowed or even convenient for an accountant to provider service of being director of the company and charge some of his fee as salary as director of that company. Do you have any insight on this?

[@CKINVESTOR]

If your company makes a lot of profit, would it be better to have a directors salary of 85k as you can reduce your corp tax bill, which would be taxed at 25%.

[@RN-fd5tr]

When you have a limited company do you have to file a different type of slmekf assesment to a PAYE employee? I ask because at the moment I am a PAYE employee and did my standard self assesment return in April. This tax year 24-25 I'm going to be doing 4 months work that requires me to register as a limited company. So in April 2025 will I need to submit 2 self assessments? 1 for my PAYE earning and 1 for my limited company earnings?

[@xChikyx]

Does this still aplies if I'm the director and shareholder but i dont live in the Uk?

[@imentor360-hm8oi]

Thanks can you create a video for IT contractor LTd on day rates of £600 & £700 .. and if you want to take say ‘salary 6.5k’ monthly how does that work.. thnks

[@gavinmlfa3325]

Would you recommend this level of pay regardless of any other income through savings and property etc?

[@sorthist9007]

if 0 salary was paid to me and my parents, we would take £400k profit from company. Both parents are shareholders and I am not. How should we split salary/sipp/dividends to reap the best rewards?

[@monturrahman878]

Can you delve more into Employment Allowance please

[@MrAlexy90]

Hi mate, can you still claim NI contributions if you’re paying into a directors loan account?

[@FYI-u9g]

Can you link to the rules for 5,000 NIC employers allowance for companies with at least 2 paid employees where both are directors and shareholders please?

[@datofficial6062]

Subbed after 1:31

[@Martin-cf5lo]

You forgot to mention that annual earnings of at least £10,000 triggers pension auto-enrollment and your viewers should check the rules around this if they employ staff.

[@PJ-om2wq]

Hi. I'm a high rate tax payer from a regular job working for a large company, and I also have a side hustle. Up until now I have paid myself and wife with dividends to use up the dividend allowance that used to be £2k each but now it's only £500 that's becoming useless. Right now I'm thinking of just making my wife the 100% share holder because at least she's not a high rate tax payer as it seems hardly worth jigging around with the percentages every year to get my own £500 allowance. Is there something I'm missing?

[@counterleo]

You should do that, but you should set-up preference shares for her or some sort of share structure that lets you retain full voting rights, otherwise if you split up there goes your company lol

[@LinusNorton]

Sorry if I missed something but why not pay yourself the lower earnings limit and do the rest in dividends? Isn't that more efficient?

[@monturrahman878]

LEL is less than the Personal Allowance so you might as well take the higher tax free amout

[@LinusNorton]

@@monturrahman878 maybe the reason is coming out better for me is rental income?

[@counterleo]

between the LEL and 9,100 you'd pay zero tax on salary and you'd pay 19% corporation tax as dividends and between 9,100 and 12,570 the video showed it, you are still better off paying a salary above 12,570, dividends

[@danfrost9492]

Now we need a way to run everything like the MPs in the country and pay zero tax

[@Zero-Investing]

What about the corp tax which will be like £9,500

[@neilcharlton]

Uk tax is a joke. Work hard to pay for all the free loaders.

[@counterleo]

UK tax is nothing compared to Europe, my take home would be £400 higher if I lived in the UK with the same gross salary.

[@aaronmarc125]

Would being on 12k salary affect any credit or mortgage applications? If you go to get credit for example car finance or mortgage. The salary wouldn't cover it?

[@rjj00]

Yes.

[@ChiefMotivation]

Hi Darren. What are your thoughts on having a free zone company in uae own 100% of the uk business? is that legal to 'avoid' taxes?

[@Jack__Reaper]

That wont work as its where the money is generated. The tax system has hundreds and hundreds of years of seeing people do silly shit. There is no free lunch and i can guarantee anything you can think of, they have thought of it first and are waiting to trap you.

[@naijamanuk]

Is there not now a maximum amount you can claim in dividends? £5k or so??

[@carlgraham5596]

Can i ask , i had no profits last year but the other 4 years i ahave been operating i have profits from , can i pay myself this way this year on the strength of the previous 4 years profits.

[@grantmcwilliam]

Do you mean can you pay yourself something through PAYE or take dividend? Do you have retained profits left in the bank brought forward to this year from previous years?

[@SolidRavenOcelot]

How does paying dividends relate to getting credit for cars, your mortgage rate, other bills and payments. Does having a salary of £12570 restrict what you can get credit for? I get dividends make up the rest of the salary but is this declared to mortgage companies and car dealerships?

[@counterleo]

Lenders may ask to see at least 2 years of company accounts and might only take 50% of the dividends into account as income. Check with the individual lender. That being said car finance is crap. If you don't want to be poor, avoid credit unless it's to buy a home or cash-generating assets. Not depreciating assets.

[@caevv]

Can you do 1 video for company with spouses, and one for big earners 150k+

[@joelbrown2782]

Are you allowed the personal allowance every year? Whether you are employed by someone or self-employed? Could never get a straight answer.

[@jamess7717]

Yes

[@joelbrown2782]

@@jamess7717 thank you

[@sennabus3356]

You haven’t included corporation tax as part of it.

[@ethnicalbert]

Corporaation tasx is 25% now though... Not 19% thats a big difference

[@deborahrose7047]

Examples please

[@BoatsAndbikes-y5q]

You didn't address what the best approach would be if, for example, you have £250-300k profit at the company level but want to take 2x50k for the two directors. With the changes to corp tax and NI, it's not so simple. Although you seem to have good info, as you say, use an accountant, not someone on KZbin!

[@Calamancotrading]

The time taken to mess about with NI to save £200 a year isn’t worth it. Additional work that you have to with accounts and HMRC takes way too much time and not worth it for that saving. Will stick to £758

[@counterleo]

unless you are making exactly £12570 profits you will be declaring dividends anyway, so filing self-assessment anyway. your Ltd company also has to produce accounts anyway. it does not cost anything more to do it properly. plus, given a choice, I'd rather pay NI to the NHS than corporation tax to the filthy gov.

[@Calamancotrading]

@@counterleo tosh. You’ve got extra work remembering to pay NI on time. I’m way too busy - the time taken would be way more than the £200 saved.

[@UltraJamZHD]

Hmrc it says after £37,700 its higher rate so confused

[@counterleo]

HMRC deducts your personal allowance in arriving at your taxable base, then it applies the 37,700 threshold. So 37,700 plus 12,570 = 50,270

[@UltraJamZHD]

@@counterleo :0 oooohhhhhhh thankyou!!!!

[@1985MrFRESH]

What happened to the property doom and gloom videos ?

[@saelaird]

Videos like this make you realise the tremendous tax burden we all face in the UK. It's like the powers-at-be hate growth.

[@counterleo]

go to Europe then, you'll come back quickly. my monthly take home would be £400 higher if I lived in the UK.

[@adriandillon7730]

I live in Scotland .. so if I pay myself £12,570 a year .. I’ll still have £12,570 to pay in tax.. the SNP are aiming for 100% tax rate 💀

[@jamescat2386]

I understand this and do this myself but I also am caught by the realisatioin that if we all do this we increase government debt, to which is will respond by attemting to create inflation to devalue the debt, the simple idea that the 'bigger the number of pounds in your pocket the richer you are' doesn't take into account changes over time that will devalue money, the answer that was 'privatise government services to create efficiency = lower the tax burden' has not played out over the last 40 years, now you pay more tax and the government rents services from the private sector. I don't know what the answer is but tax avoidence will not make the majority of us wealthy long term.

[@GrantColes-g5y]

Seek medical help.

[@garethwilliams4467]

not interested in the majority. Are they interested in me ?

[@martindrewelius2425]

As a director of a Ltd company you should only pay yourself 49500 pounds a year. Not more.

[@everyonecancraft70]

Surely under 15k is illegal for a full time job as below national minimum wage rate. Or do you lie about your hours.

[@NeilDudman]

If you’re a director you have no fixed hours, so £15k could be for just one hours work…

[@counterleo]

minimum wage does not apply to directors

[@darktheme923]

So basically, go to college.. work hard, and give away all your money :D

[@eamonndelaney188]

BS of the highest level. First clue is in first 20sec. He is not a financial or tax advisor.