How do I pay myself as a director of an Irish limited company?

## How Do I Pay Myself as a Director of an Irish Limited Company?

Choosing the right way to extract money from your company is one of the highest-value decisions you will make as a director. Done well, it can save thousands of euro in tax each year. Done poorly, you can face unexpected USC surcharges, PRSI liabilities, and close company penalties.

## The Three Main Methods

### 1. PAYE Salary

Paying yourself a salary through PAYE is the most straightforward route.

Advantages: - Creates an NI (PRSI Class S) record, which qualifies you for contributory state pension and other social welfare benefits - The salary is a deductible expense against corporation tax (saving 12.5%) - Lower salary falls within lower income tax bands

Disadvantages: - Income tax at 20% (up to €44,000 in 2026) or 40% above that - USC at 0.5%, 2%, 3%, or 8% depending on income - PRSI at 4% (employee) and 15% employer PRSI on salary (a significant cost)

The typical approach: pay a salary up to the upper limit of the 20% income tax band (€44,000 in 2026 for a single person), then extract further profits another way.

### 2. Dividends

Dividends are paid from after-tax company profits to shareholders.

Advantages: - No employer PRSI (15%) on dividend payments - Can be more tax-efficient for higher earners if the company has already paid 12.5% corporation tax

Disadvantages: - Paid from profits after 12.5% corporation tax has already been taken - Subject to income tax and USC in the hands of the recipient (not PAYE) - Close company professional services surcharge may apply if profits are retained too long (see corporation tax guide) - Dividends do not earn PRSI credits - Must be declared through self-assessment, not PAYE

Worked example: a company earns €100,000 trading profit, pays €12,500 corporation tax, leaving €87,500. A dividend of €87,500 is paid to you. You pay income tax (40%) and USC on this, but no PRSI and no employer PRSI. Compare this to paying the €100,000 as salary where employer PRSI would cost €15,000 before you even receive it.

### 3. Employer Pension Contributions

This is often the single most tax-efficient extraction method available to company directors.

How it works: - The company makes pension contributions on your behalf directly into an approved pension scheme - These contributions are fully deductible against corporation tax (saving 12.5%) - They are not subject to income tax, PRSI, or USC in your hands at the time of contribution - Tax is deferred until retirement, when you draw down the pension

Limits: Revenue imposes limits on allowable pension contributions based on age and earnings. A director aged 30-39 can contribute up to 20% of net relevant earnings into an approved scheme tax-free; a director aged 60 or over can contribute up to 40%.

## The Optimal Mix

Most owner-directors pursue a strategy along these lines:

• **Pay a salary** sufficient to use the 20% tax band, personal tax credits, and to build PRSI entitlements
• **Make maximum employer pension contributions** within Revenue limits: these are tax-free in, tax-deferred out
• **Extract remaining profits as dividends** to the extent needed for personal spending, accepting the income tax cost

Retaining profits in the company (rather than distributing them) can be beneficial for growth-focused businesses, but be mindful of the close company professional services surcharge (15%) which applies if professional income is retained for more than 18 months.

## Director's Loan Account

Directors can also borrow money from the company via a director's loan account. However:

• Loans exceeding €19,050 not repaid within nine months of year-end are subject to a 25% income tax surcharge
• The company must disclose director's loans in the financial statements
• Beneficial loans (at below-market interest) create a notional income benefit in kind

Director's loans are best used for short-term liquidity only, not as a long-term extraction strategy.

## Expenses and Benefits in Kind

The company can pay certain expenses directly (business mileage at Revenue mileage rates, business travel, professional subscriptions) which are not treated as income to you. Benefits in kind (company car, health insurance) are generally taxable.