How Company Directors Can Pay Themselves Different Amounts Each Month (Without a Tax Headache)

If you run a limited company with one or more co-directors, chances are you’re not all contributing equally every single month. Maybe one of you is deep in client work while the other is taking a breather. Or perhaps your roles shift depending on what’s going on in the business.

So how do you pay yourselves fairly - and differently from one another - without running into tax or admin trouble?

Here’s how to do it flexibly and tax efficiently without making a mess of your accounts.

The Big Idea

You don’t have to pay all directors the same amount, and you don’t have to pay the same amount every month. But you do need to use the right methods, or HMRC might think you’re taking shortcuts.

Let’s look at three ways you can pay yourselves differently, without losing sleep (or money) over it.

Option 1: Different Dividends for Different People (Using "Alphabet Shares")

This is one of the most flexible and popular methods.

How it works:

• Each director owns a different “type” of share (e.g. A shares, B shares, C shares).

• You can then choose to pay different dividends (profit shares) to each person, depending on their contribution that month or quarter.

Why it works:

• You’re only sharing profits that already belong to the company.

• You can adjust payments to suit who did what, without affecting the others.

• Dividends are often more tax-friendly than salary.

But there are a few catches:

• You need the right paperwork in place (company rules, meeting notes, dividend slips).

• You need to have enough profit in the company to legally make the payments.

• If HMRC thinks you’re using this to shift income to family members just to save tax, they could challenge it.

• If you ever sell the business, some types of shares might not qualify for the lower tax rates on the sale, depending on how they're set up.

✅ Best for: Directors who want a clean, flexible way to reward different levels of input, especially if roles change month to month.

Option 2: Everyone Gets the Same Dividend – But Some Take More Cash (Temporarily)

If you want to keep things simple - just one type of share for everyone - this option lets you handle different monthly needs without a complex setup.

How it works:

• You all get the same share of dividends when profits are paid out.

• If someone needs more money sooner, they can take a temporary advance—called a director’s loan—and it’s balanced out later when dividends are paid.

Why it works:

• You don’t need to mess around with different share types.

• It gives flexibility over who takes what, without affecting fairness long term.

Just be careful:

• These loans must be tracked properly.

• If someone takes more than their fair share and it’s not sorted within a few months after your company’s year-end, the company may owe extra tax.

• It only works if you trust each other to settle things fairly.

✅ Best for: Small teams who want flexibility without the admin of multiple share types, and who play fair with one another.

Option 3: Everyone Gets a Base Salary – Then Bonuses When Deserved

If your business is doing well, and you want a straightforward way to pay more to whoever’s been busiest, this is it.

How it works:

• Everyone gets a regular salary through payroll.

• When someone puts in extra effort, you can pay a one-off bonus.
  
  

Why it works:

• Bonuses are easy to track and reward actual work done.

• No need to touch shares or profit splits.

Downsides:

• Bonuses are taxed like any other salary and come with National Insurance costs (for both the person and the company).

• They’re less tax efficient than dividends.

✅ Best for: Directors who value simplicity, or when profit levels vary too much for reliable dividends.

What Not to Do

• Don’t just move money from the business to your personal bank account without a plan—that’s a fast track to tax and paperwork trouble.

• Don’t assume “drawings” apply to your limited company—they don’t. That’s a sole trader term.

• Don’t pay different dividends to people who own the same kind of share unless you’ve set things up properly.
  
  

Final Thoughts

There’s no one-size-fits-all solution, and the best option depends on:

• How involved each person is

• How much flexibility you want

• Whether your company is making regular profits

• How much admin you're willing to deal with

With a bit of planning, you can reward yourselves fairly and stay on the right side of the tax rules.

Need help working this out?

If you're unsure how to structure things - or want to be sure you're not triggering any unexpected tax - why not book a meeting with us to discuss your circumstances.