How to Pay Yourself Dividends from Your Limited Company

Connor Thubron
Jun 20
3 min read

Updated: 3 days ago

If you're running a limited company in the UK, one of the most tax-efficient ways to take money out of your business is by paying yourself dividends.

But many directors still ask:

"How much dividend can I pay myself tax-free?"

"How do I actually pay myself dividends?"

"How much dividends can I pay myself without paying too much tax?"

In this guide, our accountants at Ultra Tax Ltd explain exactly how to pay yourself dividends, how much you can take, the tax-free limits, and the smartest way to combine dividends and salary.

Pay Yourself Dividends from Your Limited Company

What Are Dividends?

Dividends are payments made to shareholders out of the profits of a limited company. If you're both the director and shareholder, you can pay yourself dividends as long as your company has sufficient post-tax profit (after Corporation Tax is deducted).

They’re not a salary – they’re a share of profits. That’s why dividends are usually taxed at lower rates and aren’t subject to National Insurance, making them extremely popular for limited company owners.

Learn more about our Limited Company Accounts services and how we help you stay compliant and tax-efficient.

How to Pay Yourself Dividends (Step-by-Step)

Check your company’s available profit – Only profits after Corporation Tax can be paid as dividends.
Hold a directors’ meeting – Even if you're the sole director, a formal record must be kept.
Document the decision – Create meeting minutes declaring the dividend amount.
Issue a dividend voucher – This is a formal document that must include:
- Date
- Company name
- Shareholder name
- Dividend amount
Make the payment – Transfer the dividend from your business account to your personal account.

Need help issuing a legal dividend properly? Speak to one of our accountants on 0191 341 0142 or visit our contact page

How Much Dividend Can I Pay Myself?

There is no legal limit to how much dividend you can pay yourself — the only restriction is your available post-tax profits.

However, you’ll want to stay tax-efficient. Which brings us to the big question...

How Much Dividend Can I Pay Myself Tax-Free?

For the 2024/25 tax year, here’s how dividend tax works:

Dividend Band	Tax Rate
First £12,570 (Personal Allowance, including salary)	0%
Next £500 (Dividend Allowance)	0%
£13,070 to £50,270 (Basic Rate)	8.75%
£50,271 to £125,140 (Higher Rate)	33.75%
Over £125,140 (Additional Rate)	39.35%

So, in simple terms:

You can usually take up to £12,570 salary + £500 dividends completely tax-free.
Everything above this is taxed based on your income band.

Use our Take-Home Pay Tax Calculator to estimate your post-tax income.

Salary vs Dividends – What’s the Best Mix?

Most directors choose a combination of salary and dividends to minimise tax. Here’s why:

Salary (e.g. £12,570) keeps your NI record active and is a tax-deductible business expense.
Dividends (paid from profit) are taxed at lower rates and avoid National Insurance.

This blend allows you to:

Stay below tax thresholds
Reduce personal tax bills
Keep your state pension intact

Example: A typical tax-efficient setup for many directors is:

£12,570 salary (via PAYE)
Dividends up to £37,700 to stay within the basic rate band

But the best split depends on your overall income and business profit.

Want to set your business up for long-term tax efficiency? Explore our Company Incorporation services.

Important Rules When Paying Yourself Dividends

Before paying yourself dividends, remember:

✅ Your company must be profitable after Corporation Tax
✅ Dividends must be officially declared and documented
❌ You cannot pay dividends if your company is in a loss position
❌ Paying "illegal dividends" (without profit) may result in HMRC penalties

If you accidentally take too much, it will count as a Director’s Loan, which must be repaid or will attract extra tax.

Thinking of claiming back previous tax or expenses? Check out our Tax Rebates page.

What If You're Employed Elsewhere Too?

If you already receive PAYE income from another job, you can still pay yourself dividends — but your total income affects your dividend tax rate.

That’s why working with a tax adviser ensures you don’t cross into higher tax bands unexpectedly.

Key Takeaways

You can pay yourself dividends any time – monthly, quarterly, or ad hoc – as long as profits allow.
Always combine salary + dividends for optimal tax efficiency.
There’s no cap on how much dividends you can take, but exceeding tax thresholds increases your liability.
Dividends must be backed by profit and properly recorded.