A company is separate from its director. That makes the route and record for taking money important. Salary, dividends and director’s loans are different things; neither a bank transfer description nor a year-end journal can safely replace the underlying facts.
Salary
A salary normally runs through payroll, with the associated reporting and records. Keep the pay decision, payroll result and payment evidence together. Do not label a transfer “salary” after the event without checking what was actually processed.
Dividends
A dividend is paid from available profits, not simply from cash in the bank. Keep board or decision records, dividend paperwork and the accounting evidence supporting the amount. It is not a business expense. If the company has losses, uncertain accounts or a changing trading position, obtain advice before declaring or treating a payment as a dividend.
Director’s loans
Money paid to or taken from the director may be a director’s loan. Keep a current director’s loan account showing what happened, when and why. This area can create tax and company-law consequences, especially where the balance or repayment timing is unclear.
A practical control
Before money moves, identify the intended route, the decision evidence, the person who will update the books and what must happen afterwards. If a payment has already been made without that clarity, record the facts and ask for help rather than relabelling it to fit a preferred result.
Related FoxSums resources
- Should I Become a Limited Company?
- Year-End Records Checklist for Small Businesses
- Monthly Finance Checklist for Small Businesses
Next step
If a payment to yourself is unclear, ask before treating it as salary, a dividend or a director’s loan.
Important
General information only. Check the facts and current official guidance for the business’s circumstances.
Sources and review
- Evidence check date: 3 November 2026.
- GOV.UK - Taking money out of a limited company
- GOV.UK - Director's loans