10 Things Every Limited Company Director Should Consider
Salary, VAT, pensions, perks and cash: ten ways to run your company more tax-efficiently.
Running your business through a limited company gives you more ways to pay yourself and cover everyday costs tax-efficiently than being a sole trader does. Many directors never use them. This guide covers 10 things every small limited company owner should at least consider, from how you pay yourself to how you put cash aside for tax.
Figures are for the 2026/27 tax year. Everyone’s circumstances are different, so talk to your accountant before acting on any of them.
1Payroll
Paying yourself a salary through the company’s payroll is a business cost, so it reduces the company’s Corporation Tax bill. That makes it a useful tax planning tool.
Many directors take a salary up to the personal allowance of £12,570 and take the rest of their income as dividends or from other sources. Others choose a lower salary of about £6,708 (the Lower Earnings Limit). That still counts towards your State Pension while keeping employer National Insurance to a minimum.
The right level depends on a few things:
- Employer National Insurance is 15% on salary above £5,000 a year.
- Employment Allowance can cover that NI bill, but not if you’re the only employee.
- Your other income: a second job, rental income or a spouse’s salary through the company all change the sums.
Your accountant can run the numbers each year.
2VAT registration
You must register for VAT once your taxable turnover for the last 12 months goes over £90,000, or if you expect it to within the next 30 days. You can also register voluntarily below that level.
Being VAT registered can make your business look more established, and it lets you reclaim VAT on the goods and services you buy. But charging VAT can make you more expensive for customers who can’t reclaim it.
There are also options for how you account for VAT, such as the Flat Rate Scheme or cash accounting. Always talk these through with your accountant, based on your circumstances, before you decide.
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3Relevant Life Insurance
A Relevant Life policy is life cover that your company takes out and pays for, with the payout going to your family. It’s sensible planning in its own right.
The premiums are normally allowable for Corporation Tax. They also don’t create a taxable benefit in kind for you. That makes it much cheaper than paying for a personal policy out of your own taxed income.
4Pension contributions
Your company can pay employer contributions straight into a private pension for you. It’s one of the most efficient ways to save for retirement:
- The contributions are normally allowable for Corporation Tax.
- There’s no Income Tax or National Insurance to pay on them.
You can contribute up to £60,000 a year (the annual allowance). You can also carry forward unused allowance from the previous 3 tax years. The allowance is lower for very high earners, and for anyone who has already started drawing a pension flexibly.
5Mobile phone
Your company can provide you with a mobile phone. The contract must be in the company’s name, and the company must pay the bill directly. Personal use is treated as incidental, so there’s no benefit in kind to declare. The exemption covers one phone per employee.
6Broadband
Most modern businesses need a broadband connection. If you work from home or run the business from there, a business broadband connection at your home address is a reasonable business cost. As with your phone, the contract should be in the company’s name and the bill paid from the company bank account.
7Use of home as office
If you work from home, or even just run the business admin from there, you can claim for using your home as an office. There are two ways to work out the claim:
- Flat rate. The company pays you £6 a week (£312 a year), tax-free, with no need for evidence of your costs.
- Calculated claim. Based on the space you use, how long you use it for, and the household bills you pay.
It’s worth running the calculation either way to make sure what you claim fits your situation. A calculated claim can be worth more, but it needs records to back it up.
8Trivial benefits
Your company can give you small gifts, such as a meal out, flowers or a hamper. These count as a cost for Corporation Tax, with no tax for you to pay on them. Each benefit must:
- cost £50 or less
- not be cash or a voucher that can be exchanged for cash
- not be a reward for your work or performance
- not be something set out in your contract
As a director of a small company, you’re limited to £300 a year in total. Gifts to your family members count towards that £300.
9Annual celebration
Your company can pay for an annual celebration. It’s usually thought of as a Christmas party, but it can be at any time of year. The event must be open to all employees, and it can include partners.
The limit is £150 per person attending, including VAT. So a director and their husband or wife can spend up to £300 between them.
Be careful: if the cost per head goes even 1p over £150, the whole amount becomes a taxable benefit. It’s not just the excess.
10Deposit or savings account
Money sitting in your business current account usually earns no interest. Opening a business savings or deposit account helps in two ways:
- Interest. Money in a savings account is much more likely to earn interest. It may not be life-changing, but every little helps.
- Tax set aside. If you’re VAT registered, move the VAT you collect on invoices straight into the savings account. You’ll then always have the cash to pay your VAT bill when it’s due. Setting aside a percentage of your net sales in the same way means future Corporation Tax bills shouldn’t be a struggle either.
At a glance
| # | What to consider | Key figure or rule (2026/27) |
|---|---|---|
| 1 | Payroll | Salary usually £6,708 to £12,570. Employer NI 15% above £5,000 |
| 2 | VAT registration | Compulsory above £90,000 turnover. Voluntary below |
| 3 | Relevant Life Insurance | Premiums normally allowable, no benefit in kind |
| 4 | Pension contributions | Up to £60,000 a year, plus 3 years’ unused allowance |
| 5 | Mobile phone | One phone, contract in the company’s name |
| 6 | Broadband | Contract in the company’s name, paid by the company |
| 7 | Use of home as office | £6 a week flat rate, or a calculated claim |
| 8 | Trivial benefits | £50 per gift, £300 a year cap for directors |
| 9 | Annual celebration | £150 per head including VAT. 1p over and it’s all taxable |
| 10 | Savings account | Set aside VAT and Corporation Tax as you go |
Want to check you're making the most of these?
Wolfpack Accounting reviews all ten with every limited company client. Book a free consultation and we'll look at your situation.
This guide is general information, not personal tax advice. Rates and allowances are for the 2026/27 tax year and can change.