WhatsApp Image 2023-07-25 at 14.49.11

The updated roadmap to Tax-Efficient Pay as a Limited Company owner in 2023/24.

Discover the secrets to boosting your Take-Home income this year.

As the new financial year unfolds, limited company owners find themselves at a crossroads, seeking the most tax-efficient strategies to pay themselves in 2023/24. As the financial landscape continues to shift, it’s crucial to stay ahead of the game and adapt your strategies accordingly.

Whether you’re a seasoned entrepreneur or just starting out on your business journey, we at AccNet can equip you with the latest insights and techniques to maximize your earnings while updating your knowledge on how to pay yourself from a limited company.

Continuing from our previous article, this guide has been updated for the 2023/24 tax year, by the AccNet team.

First, let’s look at the most common ways of paying yourself as a limited company owner.

  1. Paying yourself a salary

This is by far the most common and straightforward approach. By operating under the PAYE scheme and reporting to HMRC via the real-time information system (RTI), you can ensure compliance while receiving regular remuneration. Consider drawing a modest salary as part of your overall compensation package.

To maintain eligibility for state pension contributions, it’s advisable to set your salary at a minimum of £6,396 for the 2023/24 tax year. By doing so, you continue to make national insurance contributions towards your retirement benefits.

Furthermore, if your salary remains within the range of up to £12,570 (assuming no additional income besides dividends), you can benefit from your personal allowance, making it income tax-free. Additionally, there will be no employee’s national insurance to pay, further enhancing the tax efficiency of this method.

Taxation of salaries for the 2023/24 tax year:

  • The personal allowance is £12,570. Salaries up to this threshold assuming no other income, do not incur tax.
  • Between £12,570 and £50,270, a tax rate of 20% applies.
  • Between £50,270 and £125,140, a tax rate of 40% applies.
  • Over £125,140 a tax rate of 45% applies.


In 2023/24 employees are required to pay the following national insurance contributions.

Class 1 contributions at:

  • 12% for salaries ranging between £12,570 and £50,270 per year.
  • 2% on earnings above £50,270 per year

In addition, employers must also pay NI contributions:

  • 8% class 1 contribution on salaries above £9,100 per year.


Make sure to keep an eye on the NI thresholds when setting a tax-efficient director’s salary. Let’s understand how:

Unlocking the secrets of a tax-efficient director’s salary requires a keen eye for the National Insurance (NI) thresholds.

First up, we have the lower earnings limit, which for the upcoming tax year is set at a tantalizing £6,396. As a savvy director, it’s crucial to keep your earnings above this threshold to safeguard your entitlement to future benefits and state pensions. After all, you deserve to reap the rewards of your hard work!

Now, let’s take a look at the primary threshold, where the magic number for 2023/24 is £12,570. The trick here is to hover below this threshold to avoid the dreaded NICs. Once you cross this threshold, those contributions kick in.

But here’s the thing: even if your overall annual income falls below the primary threshold, if you earn above it during certain weeks or months, you’ll still have to pay Class 1 NICs. It’s a bit like a rollercoaster ride, with fluctuating earnings and varying NIC payments. That’s why budgeting becomes your sidekick on this journey.

Now, let’s shine the spotlight on the secondary threshold, currently set at £9,100 for 2023/24. Paying a director’s salary at this level brings a touch of magic—no income tax, no employees’ or employers’ NICs to pay at all!

But wait, there’s more! Enter the Employment Allowance (EA), a nifty tool for businesses and charities. With the EA, you can bid farewell to up to £5,000 from your national insurance bill every year. It’s like a tax-saving wizardry trick brought to life.



  1. Paying yourself via dividends

When your limited company earns profits after paying taxes, you have the option to share those earnings with the company’s shareholders through dividend payments. It’s important to remember that recipients of dividends need to pay taxes on them.

However, there’s good news! In the 2023/24 tax year, you can enjoy a tax-free dividend allowance of £1,000. This means that the first £1,000 of dividend income you receive each tax year won’t be taxed. It’s like a special benefit that allows you to keep more of your dividend earnings in your pocket. So, as a limited company owner, remember to take advantage of the tax-free dividend allowance to maximize your take-home income.

If you receive over £1,000 in dividend income, the tax implications are as follows:

The Personal Allowance for the 2023/24 tax year is £12,570. If your total salary and dividend income for the year falls within this amount, no income tax will be due on them.

By combining your Personal and Dividend Allowance, you can receive up to £13,570 income free of income tax in the 2023/24 tax year.

If your combined salary and dividend income exceeds £13,570 in the 2023/24 tax year, you will need to pay tax.

Dividend Tax Rates for the 2023/24 tax year:

If you receive dividends of up to a value of £50,270 a tax rate of 8.75% applies after you have used up your Personal Allowance and the £1,000 Dividend Allowance. Furthermore, from April 6th 2024, it is being halved again, going down to £500. This represents a significant decrease since the 2017/18 tax year when the allowance was set at £5,000, as seen below.


Tax year          Dividend allowance

2024/25          £500

2023/24          £1,000

2022/23          £2,000

2021/22          £2,000

2020/21          £2,000

2019/20          £2,000

2018/19          £2,000

2017/18          £5,000

  • For dividends over £50,270 and under £125,140 a tax rate of 33.75% applies.
  • Over £125,140 a dividend tax rate of 39.35% applies.


  1. Making contributions to your pension

Picture this: when your company makes contributions to your pension, it’s like a magical shield against taxes. The best part? These contributions are usually tax-deductible for the company, providing a welcome reduction in your corporation tax bill. But that’s not all!

In the world of pensions, your individual contributions are not taxed until you withdraw them in the future. Imagine building up your pension fund, knowing that the money you contribute remains untouched by the taxman. Under the current rules, you can withdraw a glorious 25% of your pension fund entirely tax-free (in most cases).

But wait, there’s more. Your annual pension allowance, a generous £60,000 this tax year, allows you to contribute significant sums towards securing your financial future while enjoying tax advantages. And if you haven’t maximized your allowance in previous years, fear not! Unused allowances from the past three tax years can be carried forward and utilized. It’s a clever way to make the most of tax efficiency and extract funds from your limited company.


In conclusion…

As we wrap up this article, it’s important to remember that not all methods are a perfect fit for every business. Each approach comes with its own quirks and considerations.

But here’s the secret sauce: the real tax advantage lies in your ability, as a company owner, to call the shots. You have the power to control when and how funds are extracted from your business, allowing you to navigate the whims of taxation timing.

Remember, companies can be the superheroes of tax efficiency, but it’s crucial to work closely with your trusted tax advisor or accountancy firm. Here at AccNet, we can help you build the perfect structure and ensure it’s regularly reviewed to keep up with the ever-changing rules and regulations. This way, you get to stay on top of your game, and let your tax efficiency reap greater results!

Call us on +44 2070973767 when you’re comfortable to discuss and we will be there to help you every step of the way.

Comments are closed.