How should I pay myself through my limited company?

When it comes to running a limited company, you have two main ways of doing this, either by paying yourself a salary through PAYE, or by taking dividends from the company’s profits.

If you pay yourself through PAYE you will be classed as an employee of the company. You can choose the amount you pay yourself, so long as this reflects the position of the business. Importantly there is no lower limit as national minimum wage rules do not apply unless there is a written contract of employment in place. Therefore it is possible for you to pay yourself a wage just under the personal allowance (currently £11,850 for the 2018/19 tax year) in order to avoid paying income tax.

Alternatively you could take cash from the business by way of dividends. Money drawn down through dividends will be subject to tax but this is at a lower rate to PAYE. You will also be given a £2,000 yearly dividend allowance, meaning you can take this amount before becoming liable to pay tax.

It is possible for you to pay yourself through a combination of the two; taking a salary just below the personal allowance and topping up this amount with dividends. You should speak with your accountant who will be able to suggest the very best way of extracting money from your company.