Director salary plus dividends: the balanced approach

Why directors take a salary

A modest salary qualifies you for state pension credits and maintains PAYE records. Many directors align salary with the Primary Threshold to minimise NIC.

Paying at least the Lower Earnings Limit also keeps student loans and childcare vouchers aligned with payroll submissions.

Layering dividends on top

Dividends are paid from post tax profits. Use management accounts to confirm retained earnings before declaring them.

Map dividends against your personal tax bands. Timing matters when you expect other income or capital gains in the same tax year.

Key takeaways

• Mix salary and dividends to cover statutory requirements and reward directors tax efficiently.
• Keep bookkeeping up to date so you know profits before voting dividends.
• Plan distributions alongside personal tax returns to avoid unexpected bills.

How we can help you

We specialise in:

• Director remuneration planning
• Quarterly management accounts
• Personal tax return preparation

Email us your latest accounts and we will outline the most efficient salary and dividend mix for the year ahead.