How Can I Take More Money From My LTD Company (Legally)?

If you’re running a limited company, you probably enjoy the flexibility that comes with how you pay yourself.

But with that flexibility comes confusion.

Many business owners aren’t sure what’s best – salary, dividends, pensions, or benefits?

Should you leave money in the company, or take it out now?

Unfortunately, there is no ‘one-size-fits-all’ answer.

It depends on your personal needs, your family circumstances, and your long-term goals.

But by understanding the options available, you can take more money from your company legally while keeping your tax bill under control. 

Let’s explore the strategies that work.

Salary vs Dividends vs Drawings

Unlike sole traders, limited company directors can’t just “draw” money whenever they like. Any money you take must be correctly classified as salary, dividends, expense reimbursement, or a director’s loan. Get this wrong, and you could face an unexpected tax bill.

Most directors use a blend of salary and dividends. 

• Salary provides a regular income, helps you qualify for a state pension, and looks good on mortgage applications. The drawback? Salaries attract both income tax and National Insurance. That’s why many directors set their salary at a low, tax-efficient level, usually around the tax-free allowance or National Insurance threshold.

 

• Dividends are paid from company profits after corporation tax. They’re taxed at lower rates than salary and don’t attract National Insurance, making them more efficient. The catch? They can only be paid if the company has sufficient retained profit.

Paying Family Members

To maximise household income, you may be able to employ a spouse or partner who is in a lower tax bracket or not currently working. As long as they genuinely carry out work for the business, such as admin, bookkeeping, or marketing, you can pay them a fair salary. This allows you to make use of their personal allowance and lower tax bands, reducing the overall family tax bill.

Children over 13 can also be employed in the business, provided Local Authority rules around working hours are followed. Whether it’s helping with social media, filing, or basic admin, this can be another tax-efficient way to take money out of the company while teaching them valuable skills.

Pension Contributions

Pensions remain one of the most effective ways to extract profits tax-efficiently:

• Company contributions are treated as a business expense, reducing corporation tax.
• You don’t pay income tax or National Insurance on them personally.
• You’re building long-term savings outside the company.

Even modest contributions soon add up. Compared to taking the same money as dividends, pensions can deliver far better overall returns.

Relevant Life Insurance

Life insurance is often overlooked in tax planning. A Relevant Life Policy, paid for by your company, can provide valuable family protection in a tax-efficient way.

• Premiums are usually deductible for corporation tax purposes.
• There’s no additional tax for you personally.
• Your family receives peace of mind and security.

It’s a smart way to safeguard your loved ones while lowering your company’s tax bill.

Interest on Director’s Loan

If you’ve ever put personal money into your company, it’s classed as a director’s loan. Your company can pay you interest on that loan — just like a bank would.

• For the company, the interest is a deductible expense, reducing corporation tax.
• For you, it’s personal income. Depending on your circumstances, the first £1,000 may even fall within your savings allowance, making it tax-free.

This can be a neat way of rewarding yourself for supporting the business financially.

Company Car

Moving the cost of a personal car into the company can be attractive — but only in certain cases. Petrol and diesel cars are generally very tax-inefficient due to high Benefit-in-Kind charges.

Electric vehicles, on the other hand, currently enjoy very low Benefit-in-Kind rates (currently 3%). That means:

• Minimal personal tax to pay.
• The company can cover purchase or lease costs, insurance, servicing, and even install a charging point.
• All of these are treated as allowable expenses, saving corporation tax.

For directors who regularly drive, an electric company car can be a significant money-saver.

Switch Personal Costs to Business Costs

Some costs you’re currently paying personally could be run through the business instead, provided they’re legitimate business expenses:

• Home office: claim a proportion of household bills.
• Phone contracts: if in the company’s name.
• Training and subscriptions: where relevant to your work.

This reduces taxable profit, saves corporation tax, and lightens your personal outgoings.

You can also cover certain lifestyle expenses such as private medical care or gym memberships through the business. These are classed as benefits in kind, so you’ll pay personal tax on the value and the company will pay National Insurance. While the tax savings aren’t huge, you are shifting these costs away from taxed personal income, which still improves your overall position.

Make Use of Trivial Benefits

Trivial benefits are a simple and often overlooked way to take money out of your company tax-free. The rules are:

• Each benefit must cost £50 or less.
• It can’t be cash or cash vouchers.
• It can’t be a reward for work done.

This means you could treat yourself (or employees) to meals, gifts, or small luxuries on the company. For directors of close companies, the cap is £300 a year — still a nice little perk without touching your take-home pay.

 

Leave Some Money in the Business

It might sound counterintuitive, but sometimes the best option is not to take the money out at all. Retaining profits allows you to:

• Reinvest in growth (staff, systems, or equipment).
• Build up a cash buffer for security.
• Increase the long-term value of your company if you ever sell.

Think of it as planting seeds. The money you leave in today could return many times more tomorrow.

 

Find the Right Balance

The smartest directors don’t just ask “how can I get more money out?” They also ask:

• How much do I need personally right now?
• How much should I leave in for growth and security?
• What’s the most tax-efficient mix of salary, dividends, and benefits for my situation?

 

Getting this balance right requires planning. By taking the time to look at the bigger picture, your lifestyle needs, family circumstances, and business ambitions you can design a strategy that gives you more money today while building a stronger business for tomorrow.

 

There are many perfectly legal and tax-efficient ways to take money from your company — but what’s right for one director may not be right for another.

If you’re unsure, don’t leave it to chance. Speak to a professional who can help you put the right mix in place. A little planning now could save you thousands in tax and finally allow you to take the rewards your hard work deserves.