How Do I Take Money Out of My Limited Company Without Paying Too Much Tax?
- Skyrock Accountants
- 3 hours ago
- 4 min read
If you run a limited company, this question comes up sooner or later — often when profits start to build up, or when you realise your personal tax bill feels higher than it should.
“I’ve made money in the company… so how do I actually get it out, without upsetting HMRC or overpaying tax?”
As a tax adviser, this is one of the most common conversations I have with directors. The good news is that there are sensible, HMRC-approved ways to do this — as long as you understand what you’re doing and why.
Let’s walk through it calmly and clearly.
First Things First: How HMRC Looks at This
From HMRC’s point of view, money leaving a company must be categorised properly. There’s no flexibility on that.
Every payment must fall into a recognised box — such as salary, dividends, expenses, benefits, or capital. When people get into trouble, it’s usually because money was taken without deciding what it actually was.
This is why good planning matters — not clever tricks.
How Most Directors Start: Salary and Dividends
For many owner-directors, a salary plus dividends approach is still the foundation.
How it usually works in practice
You pay yourself a modest (small) salary through payroll
You take dividends on top, when the company has made profits
Why directors like this:
It keeps National Insurance lower than salary alone
It’s well understood and accepted by HMRC
It’s flexible — dividends can be adjusted as profits change
A real-world exampleA director takes a small monthly salary and declares dividends quarterly once they know how the business is performing. This avoids over-drawing cash early in the year.
Dividends must always come from profits — if there aren’t any, they can’t be paid.
A Smarter Long-Term Option: Company Pension Contributions
Once profits increase, I often see directors overlook pensions — even though they are one of the most tax-efficient options available.
Instead of paying yourself more income, the company can pay into your pension.
Why this works so well:
Pension contributions reduce corporation tax
There’s no income tax or National Insurance personally
You’re building long-term wealth, not just short-term income
In practiceRather than increasing dividends at the year end, a company makes an employer pension contribution. The director keeps more value overall, and the company pays less tax.
This is especially effective for profitable companies.
Using a Director’s Loan Account Properly
Director’s Loan Accounts are misunderstood — but they’re very useful when handled correctly.
When the company owes you money
This usually happens when you:
paid company costs personally
lent money to the business
When the company repays you, it’s normally tax-free. Always keep records of your money you spent on behalf of your company.
When you owe the company money
This is where issues can arise:
extra corporation tax charges
possible personal tax if loans aren’t cleared on time
A common scenarioA director covers startup costs personally. Later, once cash flow improves, the company repays them without tax.
Used well, DLAs are fine. Left unmanaged, they cause problems.
Can Dividends Be Shared With a Spouse?
Yes — but only when done properly.
This works when:
shares are genuinely owned
the spouse has real rights to income and capital
dividends reflect share ownership
What HMRC doesn’t accept are informal arrangements where income is shifted without real ownership.
When set up correctly, this can reduce a family’s overall tax bill — but paperwork matters.
Taking Money Out Through Expenses and Allowances
Not every pound needs to be taken as income.
Directors can often be reimbursed for:
business mileage
home-working costs
business travel
professional subscriptions
ExampleInstead of increasing salary, a director claims mileage for client visits at HMRC rates.
The test is always the same:Was the cost wholly and exclusively for the business?
Small Benefits That Are Easy to Miss
Over the years, I’ve seen directors miss perfectly legitimate benefits, such as:
small non-cash gifts
annual staff events
a company mobile phone
employer-funded training
Cycle to Work schemes
Individually, they seem small — but together they reduce the need to take extra taxable income.
What About More Complex Strategies?
Some options — like share buybacks, capital reductions, or selling shares — are usually part of exit or succession planning, not day-to-day income.
These can be very tax-efficient when used at the right time, but they should always be planned carefully and with advice.
Sometimes It’s Not “How”, It’s “When”
Tax efficiency isn’t always about clever planning. Sometimes it’s about timing.
Examples include:
deferring dividends into the next tax year
making pension contributions before the year end
spreading income over multiple years
Small timing decisions can make a big difference.
So, What’s the Right Way to Take Money Out?
There’s no single answer.
The right approach depends on:
how much profit your company makes
your personal income
your family situation
what you want to do long term
What works well for one director may be completely wrong for another.
A Word From an Adviser
Most problems I see don’t come from aggressive tax planning.They come from not planning at all.
Taking a bit of time to structure things properly usually saves money, stress, and awkward conversations later.
Speak to Skyrock Accountants
At Skyrock Accountants, we help limited company directors:
understand their options clearly
take money out tax-efficiently
stay compliant with HMRC
plan with confidence
If you’re not sure whether you’re paying yourself in the best way, a short conversation can make a big difference.
We’ll review your current setup and explain — in plain English — what could work better for you.
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