Taking money out of your company

7 min read · 24 September 2026 · Written for business owners

Money in the company

Money in a limited company belongs to the company. To use it personally you take it out by one of three routes, and each is taxed differently.

Figures on this sheet are for the 2026/27 tax year.

The three routes

Salary.

Deductible for the company. You pay income tax at 20%, 40% or 45% (gov.uk, Income Tax rates and Personal Allowances; Scottish rates differ) and employee national insurance at 8%, and 2% above the upper earnings limit. The company pays employer national insurance at 15% on salary above £5,000 a year (gov.uk, Rates and thresholds for employers 2026 to 2027). It counts towards your state pension record.

Dividend.

Paid out of profit after corporation tax, which is 19% on profits up to £50,000 and 25% on profits above £250,000, with marginal relief between (gov.uk, Corporation Tax rates). No national insurance. Taxed at 10.75%, 35.75% or 39.35% above the £500 dividend allowance (gov.uk, Tax on dividends). Only available from distributable profits.

Employer pension contribution.

Paid by the company, normally deductible, no national insurance, and no income tax on you when it is paid. You cannot draw it until the normal minimum pension age, which is 55 now and 57 from 6 April 2028 (Finance Act 2022).

A small salary with the rest taken as dividend costs less national insurance than the same amount taken as salary.

Your accountant can run the figures for all three routes on your numbers.

What the choice depends on

Salary and dividend give you the money now. A pension contribution is taxed less on the way in and gives you the money after the minimum pension age.

Which suits you depends on your age, what else you own, what the money is for, whether you are about to apply for a mortgage, and whether the business may be sold. The answer can change from year to year.

Age. The closer you are to the minimum pension age, the less the wait for pension money costs you.
A mortgage in the next two years. A lender looks at your salary and dividends. An employer pension contribution is not income to you, so it does not count.
Whether the business might be sold. After a sale the company is no longer yours, so it cannot make contributions for you.
What else you hold. Money in a pension is locked away until the minimum pension age, so what you hold outside the company and the pension matters.
Other shareholders. Dividends on the same class of shares are paid in proportion to the shares held. Salary and pension contributions can be different for each person.

A business owner checking the figures in their studio

Three problems to avoid

Taking the same as last year. If profit rises and drawings do not, cash builds up in the company, and the surplus cash rules apply.
Not looking at all three routes. The pension route is taxed differently from the other two and belongs in the same comparison.
Drawing everything. The company is left with no reserve, and you have a personal tax bill to pay on all of it.

Questions and answers

Can I leave it in the company?

You can. Cash beyond what the business needs can reduce the inheritance tax relief on your shares, can affect the relief on a sale, and can affect the corporation tax rate. Your accountant can explain the three rules.

Is a director’s loan a way of taking money out?

It is a loan, and it has to be repaid. If it is not repaid within nine months and one day of the company’s year end, the company pays a tax charge on the outstanding amount, which is repaid to the company when the loan is repaid (Corporation Tax Act 2010, section 455). A loan over £10,000 is also a benefit in kind unless interest is charged (gov.uk, Director’s loans).

Can I put my spouse on the payroll or the share register?

Salary to a spouse has to reflect work they do for the company. Dividends to a spouse have to be paid on shares they own. Your accountant can explain the conditions before anything is set up.

When do I decide?

A pension contribution or a salary payment counts in the tax year it is paid, and the tax year ends on 5 April.

What to do next

Ask your accountant to show you all three routes side by side on your figures, including what an employer pension contribution would cost the company and what tax it would save.
How much to pay into a pension, and which pension, is regulated advice. A regulated financial adviser looks at that, and your accountant can introduce you.

This sheet explains how the rules work. It is not advice, and it does not take your circumstances into account. Your accountant can talk it through with you and can introduce you to a regulated financial adviser.