Pensions, Benefits, Rent and Director's Loans: Other Ways to Pay Yourself

Company contributions to your registered pension are deductible for corporation tax and free of income tax and National Insurance. Unlike personal contributions, they are not limited to your salary, so a director on £12,570 can still receive large contributions. The annual allowance is £60,000, tapered for very high earners (down to £10,000), and you can carry forward unused allowance from the previous three years. Unused 2023/24 allowance is lost after 5 April 2027. Example: a £30,000 company contribution saves £7,500 of corporation tax at 25%.

Some benefits are exempt from tax and NIC, and the company still deducts the cost. Examples include one mobile phone per employee on a company contract and trivial benefits of up to £50 each (directors of close companies are capped at £300 a year). Providing the benefit directly is cheaper than paying you extra salary to buy it yourself.

If your director's loan account is in credit, the company can pay you interest at a commercial rate. It is deductible for the company if actually paid within 12 months of the year end, and carries no NIC. The company deducts 20% tax and reports it quarterly on form CT61. Example: interest of £1,600 on a £40,000 balance saves £400 of corporation tax at 25%. Your personal savings allowance (£1,000 basic rate, £500 higher rate) may cover some or all of it.

If the company uses your home office or a property you own, it can pay you rent. The rent is deductible for the company and carries no National Insurance. You pay income tax on it, but it can soak up losses from your other rental properties. Put a written rental agreement in place and keep the rent commercial. The £1,000 property allowance cannot be used against rent from your own company. Example: £300 a month gives the company a £3,600 deduction.

You can borrow from your company, but two charges may apply. If the loan is still outstanding nine months and one day after the year end, the company pays section 455 tax at 35.75% for loans made from 6 April 2026; it is refunded once the loan is repaid. If the balance exceeds £10,000 at any time in the tax year and is interest-free, you pay benefit-in-kind tax on interest at HMRC's official rate (3.75%), and the company pays 15% Class 1A NIC. A loan taken early in an accounting period and cleared by the deadline gives you up to 21 months of cheap credit. Repaying and re-borrowing within 30 days to dodge the charge does not work for amounts of £5,000 or more.

If your total loans from the company never exceed £10,000 at any point in the tax year, there is no benefit-in-kind charge. Repaid within nine months of the year end, there is no section 455 tax either, so the loan is entirely free.

A written-off loan is taxed on you like a dividend (after the £500 allowance, 10.75%, 35.75% or 39.35%), but Class 1 National Insurance is also due, and the company gets no corporation tax deduction. Example: writing off £15,000 for a basic-rate director costs £1,559 of income tax, £1,200 of employee NIC and £2,250 of employer NIC. Leaving the loan outstanding may be cheaper, as any section 455 tax already paid is refunded if it is repaid or written off later.