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At Carmody Kelly Co we believe that good property decisions start with a clear picture of your finances. Many of the buyers and sellers we meet run their own companies, and one question comes up again and again: what is the best way to take money out of the business? The answer affects far more than your annual tax bill. It shapes your retirement savings, your personal cash flow and, crucially for anyone planning a move, how much a lender is willing to offer you.

Why the Question Matters

If you are a director of your own limited company, the money in the business account is not automatically yours to spend. Profits belong to the company, and every euro you draw has to come out through a recognised route. The three most common are salary, dividends and pension contributions, and each is treated very differently by Revenue. Getting the balance wrong can mean paying more tax than necessary, or leaving yourself with an income profile that looks weaker on paper than it really is.

Salary: Simple, Visible and Deductible

A salary paid through payroll is the most straightforward option. It is an allowable expense for the company, which reduces the profit subject to corporation tax. On your side, it is taxed through PAYE, with income tax, USC and PRSI deducted at source.

The main advantage is predictability. A regular salary gives you a steady personal income, builds your social insurance record and provides clear evidence of earnings. The drawback is that once your income passes the standard rate band, a large share of each additional euro goes to tax at the higher rate, along with USC and PRSI.

Dividends: Flexible but Often Misunderstood

Many business owners assume dividends are automatically the tax-efficient choice, often because of advice they have read online that was written for other markets. In Ireland, the picture is different. Dividends are paid from profits that have already been taxed at company level, and they are not deductible for corporation tax. The director then pays income tax, USC and PRSI on the dividend at their marginal rate.

For higher earners, that double layer of tax can make dividends more expensive than salary. They still have a role, particularly for shareholders who are not active in the business or where a one-off distribution suits the company’s circumstances, but they should be used deliberately rather than by default.

Pension Contributions: The Most Tax-Efficient Route for Many

For directors who do not need every euro of profit today, company pension contributions are often the most efficient option of all. Employer contributions to a Revenue-approved scheme are generally deductible for the company and are not taxed as income in the director’s hands when they are paid in. The fund grows free of tax, and at retirement part of it can usually be taken as a tax-free lump sum, within Revenue limits.

The amount a company can contribute depends on factors such as your salary, age and years of service, which is one reason why paying yourself a reasonable salary can support stronger pension funding. Directors can also make personal contributions and claim tax relief, subject to age-related limits.

Finding the Right Mix

In practice, most business owners benefit from a combination. A common approach is to take a salary that covers personal living costs and supports pension funding, make regular employer pension contributions, and leave surplus profits in the company, where trading income is taxed at 12.5 per cent. Be aware, however, that closely held companies can face a surcharge on certain types of undistributed income, so retaining profits needs careful management too.

The right blend depends on your personal circumstances, your spouse’s or partner’s income, your plans for the business and how soon you expect to need the money.

Where Property Comes Into It

This is where the conversation often reaches our office. When a company director applies for a mortgage, lenders usually want to see two or three years of accounts along with evidence of personal income. A low salary topped up with irregular dividends can make your earnings look smaller or less stable than they really are, which may reduce the amount you can borrow.

If you are thinking of buying a home, trading up or investing in property within the next few years, it is worth discussing your remuneration strategy with your accountant well in advance. A modest adjustment now could make a meaningful difference to your borrowing capacity when the right property comes along.

Plan Before Year-End

Decisions about salary, dividends and pension contributions are far easier to make before the company’s financial year closes than after it. A review with your accountant a few months before year-end gives you time to adjust payroll, arrange pension contributions and consider how your personal and business goals fit together.

If you would like to discuss buying or selling a property, contact us on 065 6842950 or email john@carmodykelly.ie or visit carmodykelly.ie.

Disclaimer: This article is based on publicly available information and is intended for general guidance only. While every effort has been made to ensure accuracy at the time of publication, details may change and errors may occur. This content does not constitute financial, legal or professional advice. Readers should seek appropriate professional guidance before making decisions. Neither the publisher nor the authors accept liability for any loss arising from reliance on this material.