Should I pay myself a salary?
If you own a limited company, it can be tax efficient to pay yourself a salary from your company. Your salary can utilise income tax and National Insurance tax-free allowances while reducing taxable corporation profits.
Not eligible for the £5,000 NI Employment Allowance
If, as the director, you are the sole employee of the company, the £5,000 employment allowance cannot be claimed. In this case the optimal directors salary is currently £758.33/month. At this level you stay below both the income-tax tax-free allowance and the employees NI tax-free allowance, while fully utilising the employers NI tax-free allowance.
Eligible for the £5,000 NI Employment Allowance
If you are not the sole employee of the company, the £5,000 employment allowance can be claimed. In this case the optimal directors salary is currently £1,047.50/month. At this level you can claim the employment allowance against the employers NI liability while staying below the income-tax tax-free allowance and fully utilising your employees NI tax-free allowance.
To pay employees (including directors) you must first register your business as an employer and receive an employer PAYE reference number. Please click the link below to do so: