HOW TO PAY YOURSELF AS A LTD COMPANY DIRECTOR
In the tax year 2019/20 you are allowed to earn up to £8632 before you have to start paying national insurance. But because this is over the lower earnings limit for NIC you still get all the benefits (retain state pension etc) without having to actually pay any national insurance.
This salary (£718 per month) is a bit low for some and may also cause issues when applying for loans or a mortgage (unless you use a specialist mortgage advisor who deals with self employed/directors). So you may want to pay yourself slightly more.
You are allowed to earn up to £12500 in the 2019/20 year before having to pay income tax, which works out to £1041.66 per month.
Another way to make sure you are paying yourself in the most tax efficient way is to pay yourself dividends. You are allowed to take up to £2000 in dividends, tax free, above your personal allowance (£12500). But any amount over the £2000 will require you to pay 7.5% tax. Still better than 20%!
Please be aware, however, that dividends must only be given from after tax profits. It is illegal to pay dividends if you don’t have enough profit after corporation tax to cover the dividend payment!