How to pay yourself as a business owner

As a Director of a Limited Company, you can pay yourself a salary, take dividends and contribute to a pension. Or you don’t have you pay yourself at all. While the best course of action will depend on your circumstances, it’s important to make sure that you are not only tax compliant but that you save as much on your tax bill as possible.

Proprietary Director vs Non-Proprietary Director

First, it’s important to establish your position as a director, as this will have an impact on your tax obligations. Fortunately, there are only two main types of director and a clear differentiation between the two. In a nutshell, a proprietary director (or controlling director) owns more than 15% of the share capital of the company. A non-proprietary director (or non-controlling director) owns less than 15% of the share capital of the company.

Here are three options for paying yourself.

Option 1 - Salary

Option 2 – Director’s Pension Contributions

Option 3 – Dividends

Generally speaking, a director’s salary, although taxed under PAYE, usually gives a lower tax liability than a dividend. Bear in mind that it is also possible to pay yourself a minimal salary and make up the rest through dividend payments. However, what works best for one person may not be the right choice for you.

If you would like extra peace of mind that you’re making the right choice for your director’s payments, then we would love to help - call Kevin O Donnell 053 9170507 or email kodonnell@rda.ie