How Much Should You Pay Yourself
How Much Should You Pay Yourself as a Creative Agency Founder?
And How to Do It Tax-Efficiently
When you run your own creative business, one of the hardest questions to answer is:
“How much should I actually pay myself?”
It sounds simple, but if you’re running a limited company, the answer depends on your profits, your tax position, and your future plans.
Pay yourself too little and your personal finances suffer. Pay yourself too much - or in the wrong way - and you could face an unexpected tax bill or drain cash from your business too early.
This guide breaks down how to approach your director’s pay with clarity, confidence, and tax efficiency.
Why This Question Matters More Than You Think
Creative agency founders often move from freelance work into running an agency without changing how they think about income.
You might dip into the business account when you need cash, or keep your drawings low “just in case.” That approach often leads to:
Messy finances
Missed tax planning opportunities
Feeling unsure about how your business is really performing
Getting this right means paying yourself enough to live, while leaving enough in the business to grow.
The Two Main Ways to Pay Yourself: Salary and Dividends
If you’re the director of a limited company, your pay typically comes from a mix of:
A small salary (which is tax-deductible for the company)
Dividends from the company’s post-tax profits
1. Salary: What You Need to Know
A director’s salary works like any other employee’s salary. It goes through payroll and is subject to PAYE (income tax) and potentially National Insurance, depending on the level of salary you choose.
Why take a salary at all?
It reduces your company’s corporation tax
You may qualify for state pension and other benefits
It creates consistent personal income
Typical setup for the 2025/26 tax year:
A salary of £12,570 (equal to your personal allowance) can be taken without PAYE or National Insurance being deducted from your pay. However, since April 2025, this salary will incur Employers’ National Insurance at just over £1,100.
If your company has at least one other employee on payroll - even just one other staff member - you may be eligible to claim Employment Allowance, which covers up to £10,500 of employer National Insurance per year. This means you can potentially pay yourself a higher salary while still avoiding extra NI costs.
2. Dividends: Your Share of the Profits
Dividends are paid from retained profits after corporation tax. You cannot take dividends unless your company has made sufficient post-tax profit, even if there’s money in the bank.
Why use dividends?
They are taxed at lower rates than salary
They are not subject to National Insurance
They are flexible and can be adjusted as needed
Dividend tax rates for 2025/26:
First £500 is tax-free (Dividend Allowance)
Basic rate (up to £50,270 total income): 8.75%
Higher rate (£50,271 to £125,140): 33.75%
Additional rate (over £125,140): 39.35%
Combining salary and dividends allows you to balance tax efficiency with financial stability.
So... How Much Should You Pay Yourself?
Here’s a simple framework to consider:
Start with a salary of £12,570, or slightly less if advised
Top up with dividends, based on available post-tax profits
Keep a buffer in the business for VAT, tax, and future expenses - as a rule of thumb, hold back at least 50% of what you receive
Adjust as needed to meet personal goals, such as mortgage applications or pension planning
There’s no one right answer, but with the right planning, you can pay yourself efficiently and responsibly.
What Else to Consider
Pensions
Your company can contribute directly to your pension. These payments are deductible for the business and do not trigger personal income tax or National Insurance. Pensions are particularly useful if you’re approaching the higher-rate tax threshold.
Director’s Loans
If you’ve lent money to the company, you can repay yourself tax-free. You may also be able to charge interest, which the company can deduct for tax purposes. Depending on your personal income, that interest may be tax-free.
Because interest receives corporation tax relief, this can be a very tax-efficient way to extract money from your limited company - as long as the interest is charged at a commercial rate.
Cash Flow
Even if your bank balance looks healthy, always check whether your company has actually made a profit. A strong bank balance doesn’t always mean the business is profitable. This is where monthly management accounts become essential. Paying dividends when there isn’t enough profit can cause serious compliance and cash flow issues.
Common Mistakes to Avoid
Mixing personal and business finances
Taking too much too soon, especially before you know your full tax picture
Assuming profit equals cash
Not setting aside money for company and personal tax bills - especially dividend tax, which is due the following January and July
Final Word: Paying Yourself Is a Strategic Decision
You didn’t build your agency to stay stuck, stressed, or confused about how to pay yourself. And you didn’t set up a limited company just to repeat freelance habits.
The goal isn’t just to take money out - it’s to pay yourself in a way that’s clear, sustainable, and supports both your lifestyle and your long-term business goals.
As your financial coach, I work with creative and marketing agency founders to remove the guesswork. Together, we’ll design a pay strategy that supports your life and helps your agency grow with confidence.
Want help deciding how to pay yourself?
Let’s talk about salary, dividends, pensions, and what makes sense for your agency now and in the future.
Book a discovery call or email [email protected]
