There are several ways to take money out of a limited company, each with different tax implications. I’ll summarise the main options below, but feel free to get in touch if you’d like tailored advice.
Loan Repayments
If you’ve loaned money to your company - to help it get started or cover cash flow - you can usually repay yourself tax-free, provided the company has enough cash to do so.
Because this is a repayment of a loan, it doesn’t need to be reported on your personal tax return.
Loan to Director
You can also loan money from the company to yourself. I generally recommend other methods first, but it’s an option if absolutely necessary.
HMRC has anti-avoidance rules to discourage abuse of director loans. If the loan is still outstanding 9 months and 1 day after your company’s year-end, the company will face an additional Corporation Tax charge of 33.75% on the loan amount. This can be reclaimed later — but the process is slow and complex.
For these reasons, it’s best to avoid director loans unless there’s no alternative.
Dividends
If your company has distributable profits, you can pay dividends to shareholders. These must be distributed in proportion to shareholdings.
For example, a £1,000 dividend split between two shareholders with 70/30 ownership would result in £700 and £300 respectively.
Importantly, the company doesn’t need to be profitable in the current year — but it needs to be profitable on a cumulative basis.
You should record declared dividends in the company’s minute book and prepare a dividend voucher (often done via accounting software).
Dividend Allowance for 2025/26
The dividend allowance is now £500, meaning the first £500 of dividend income is tax-free. Any amount above this is taxed at:
- 8.75% (basic rate).
- 33.75% (higher rate).
Dividends must be reported on your personal tax return.
In practice, many companies use a director’s loan account during the year and declare a final dividend at year-end to offset the balance. This has the benefit of not having to prepare the dividend voucher on a monthly basis.
Payroll
You can set up a payroll to pay yourself and other directors. While this involves more admin, it can offer tax advantages - although this is generally when you don’t have any other source of income.
Salary is treated as a business expense, reducing your company’s taxable profits. For you personally, it’s taxed like any employment income, with Income Tax and National Insurance applied.
You’ll need to report this on your personal tax return using the information on the P60 that your company or payroll provider produces for you.
All figures correct as of 14 November 2025.
