If you’re running a limited company, you might be wondering, can a director withdraw money from a company account? It seems straightforward—it’s your business, after all. 

But the truth is, the money in the company account isn’t technically yours; it belongs to the business. How you take it out has to follow strict rules. Don’t worry, though—we’ll walk you through the main options, including what not to do. 

How can a director withdraw money from a company account?

There are four main ways to “take” money out of your company legally:

1. Paying yourself a salary

As a director, you can pay yourself a salary, just like any other employee.

This comes with certain benefits, including:

• Tax-deductible: Salaries reduce your Corporation Tax bill since they count as a business expense. 
• State benefits: A salary above the Lower Earnings Limit qualifies you for state pension contributions. 

Most directors pay themselves a low salary—around £9,100 in the 2024/25 tax year—to avoid paying National Insurance Contributions (NICs). The rest of their income often comes from dividends (more on that in a second). 

We’d recommend reading our article “How much salary should I take from my limited company?” to better understand how much salary you should be taking. 

2. Taking dividends

Dividends are one of the most tax-efficient ways for a director to withdraw money from a company account. If your company has made a profit after paying Corporation Tax, you can distribute these profits to yourself as a shareholder. 

However, there are a couple of key rules to follow:

1. Profits only: You can only pay dividends from post-tax profits. No profits? No dividends. 
2. Paper trail: You need proper documentation, even if you’re the only shareholder. This includes holding a director’s meeting and issuing dividend vouchers.
3. They are not a deductible expense: Dividends cannot be counted as an expense for your business when you’re working out your Corporation Tax.

Your limited company does not need to pay any additional tax on dividends it issues, but the shareholders might. Dividends are subject to dividend tax, but they’re not liable for NICs, which often makes them more tax-friendly than a salary. 

If you’re wondering what your dividend tax bill would be, we’d recommend checking out our free dividend tax calculator. All you need is a list of your income and you’ll see in seconds what tax you’ll have to pay. 

3. Reimbursing expenses

If you’ve paid business expenses with personal funds, you can reimburse yourself from the company accounts. This includes costs like travel, equipment, or software. Just make sure to keep receipts and detailed records for HMRC.

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4. Directors’ Loans (use with caution)

If you need extra money, you might consider borrowing money from your company. This is called a director’s loan, but it comes with strings attached:

• If your director’s loan account (DLA) is overdrawn and not repaid within nine months of the company’s year-end, your company will face an additional Corporation Tax bill on the amount outstanding. For more information, check out our ultimate guide to director’s loan accounts. 
• Interest may also apply if your loan exceeds £10,000, and it must be reported on your personal Self Assessment tax return. Your limited company will also have to pay Class A National Insurance.

We’d recommend you read our full guide which covers what a director’s loan account is and what the tax implications are for more information.

What you can’t do

It’s important to understand that you can’t treat the company account like your personal bank account. Taking money without following the proper procedures–whether as salary, dividends, or a director’s loan account–-could lead to:

• Tax penalties: HMRC monitors company finances closely. Improper withdrawals might result in tax fines or higher than expected tax bills.
• Legal consequences: Failing to follow proper procedures could breach your fiduciary duties as a director.

What’s the most tax-efficient way?

Most directors find a combination of a small salary and dividends to be the most tax-efficient way to withdraw money from a company account. 

This method often minimises both NICs and Personal Income Tax, keeping more money in your pocket.

However, we’d always recommend speaking to someone experienced in Limited company accounting who knows and understands your business.

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The final word on withdrawing money as a director

So, can a director withdraw money from a company account? Yes, but only in ways that follow the rules. Whether it’s through a salary, dividends, reimbursed expenses or a director’s loan, each option has its own tax implications and legal requirements.

If you’re ever in doubt about the best way to take money out of your business, make sure you consult an experienced accountant like Crunch. They’ll help you navigate the rules, maximise your income, and avoid any unwelcome surprises from HMRC. 

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