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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 (NI) tax-free allowances while reducing taxable corporation profits.
For most directors, the most tax-efficient salary during the 24/25 personal tax year to 5/4/2025 is £1,047.50/month (£12,570/year).
Depending on your circumstances, you may pay some employers NI at this salary level.
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 you can claim the employment allowance against the company's employers NI liability while staying below the income-tax tax-free allowance and fully utilising your employees NI tax-free allowance.
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 you will be due to pay employers NI on the portion of your £12,570 annual salary between £9,100 & £12,570. However, as the higher salary reduces company profits, the company will save more in corporation tax than it pays in employers NI, resulting in an overall lower tax liability.
To pay employees (including directors) you must first register your business as an employer and receive your employer 'PAYE' and 'Accounts Office' reference numbers. Please click the link below to do so:
