Director remuneration — salary, dividends, and pension in one year — Blue Haven guides

Owner-managers often inherit a “low salary, high dividend” pattern without revisiting whether it still fits National Insurance thresholds, pension annual allowance, and a planned exit. A single profitable year is not the same as a repeatable policy.

Salary as the foundation

Paying at least enough salary to preserve state pension entitlement and use the personal allowance remains a common starting point. Above that, National Insurance and corporation tax interactions matter more than habit. Your accountant’s payroll run should reflect a deliberate figure, not last year’s default.

Dividends after the company’s needs

Dividends require sufficient post-tax profits and should not drain working capital needed for VAT, PAYE, or a planned equipment purchase. We ask directors to list the next twelve months of company cash commitments before discussing personal extraction.

Pension contributions as a corporate choice

Employer pension contributions can reduce corporation tax while building personal retirement capital. They are not free — the cash leaves the company — and large contributions may interact with the annual allowance. Timing a contribution in the company’s accounting period can matter as much as the personal tax year.

Exit years need a different map

In the two to five years before a trade sale, remuneration choices should align with buyer due diligence and personal capital gains planning. That is where a joint conversation between adviser and accountant earns its fee — product selection is rarely the bottleneck.