Sones Accountancy Services: the most tax-efficient way to pay yourself as a company director in 2025

If you are a limited company director, one of your biggest advantages over a sole trader is flexibility, especially when it comes to how you pay yourself. Getting this right can save you thousands in tax each year and help you plan more confidently for the future.

So, what is the most tax-efficient way to pay yourself in 2025?

A Modest Salary

Most directors choose to pay themselves a small salary, typically around the personal allowance of £12,570 for 2025/26.  This is why this works:

• You qualify for state pension and benefits by earning above the Lower Earnings Limit (£6,396).
• You use your personal tax allowance efficiently without paying Income Tax.
• Your company can claim the salary as a tax-deductible expense, reducing its Corporation Tax bill.

However, National Insurance rules make a small difference depending on your setup:

• If you are the only employee/director, your company does not qualify for the Employment Allowance and will pay a small amount of employer’s National Insurance.
• The employer’s NI threshold is £9,100, so on a £12,570 salary, the company will pay 13.8% on £3,470 = £479 per year.
• If your company has more than one employee or director, you can claim the Employment Allowance (worth up to £10,500 per year), which means no employer’s NI will be due on that salary.

Either way, this salary level remains the sweet spot as it is still the most efficient balance between tax savings and qualifying earnings.

Top Up with Dividends

Once you have paid yourself a tax-efficient salary, the next step is to draw dividends from your company’s profits.

Dividends are taxed at lower rates than salary income:

• 8.75% for basic rate taxpayers
• 33.75% for higher rate taxpayers
• 39.35% for additional rate taxpayers

Plus, you get a £500 dividend allowance each year.  The big benefit is that dividends are not subject to National Insurance, so more of your profits stay in your pocket.

The Ideal Mix

For most directors, the most tax-efficient combination is:

• Salary of £12,570 + Dividends up to the basic rate threshold (£50,270 total income).

This gives you a great balance using your personal allowance fully, qualifying for state benefits, and keeping tax and NI to a minimum.

Why It Matters

Paying yourself the right way means:

• You take home more of what you earn.
• Your company pays less corporation tax.
• You stay compliant with HMRC rules.
• You can plan with confidence.

At Sones Accountancy Services, we help directors understand the best setup for their situation, so you can make the most of your company’s profits while staying tax-efficient.

If you would like to check whether your current pay structure remains the best fit for 2025, please get in touch; we will help you crunch the numbers.