Paying yourself from your aesthetic clinic should not be something you decide at the end of each month based on how much money happens to be sitting in the business bank account.

For many clinic directors, the lines between business money and personal money can become blurred. You might transfer money when you need it, take a larger amount after a particularly good month, or simply withdraw money and work out what it was for afterwards.

That can create problems.

There are different ways a director can take money from their company, and each has different tax, accounting and legal implications. Salary, dividends and money taken from the company are not interchangeable.

This guide explains how clinic directors can pay themselves properly, what to consider when deciding between salary and dividends, and some of the common mistakes that can cause problems later.

1. How Can a Clinic Director Pay Themselves?

If you run your aesthetic clinic through a limited company, the company is legally separate from you.

The money in the company bank account belongs to the company. It is not automatically your personal money simply because you own the shares.

There are several ways you may take money from your company, depending on your circumstances.

The most common are:

• Salary through payroll

• Dividends from available profits

• Reimbursement of legitimate business expenses

• Director's loan transactions in certain circumstances

Salary and dividends are often the main ways directors pay themselves.

The important point is that they work differently.

A salary is generally treated as an employment payment and processed through payroll. Dividends are distributions of company profits to shareholders and can only be paid when the company has sufficient distributable profits.

You cannot simply choose whichever description gives the lowest tax after taking the money.

The transaction needs to reflect what actually happened.

2. How Does Paying Yourself a Salary Work?

As a director, you can receive a salary from your company.

The salary is processed through the company's payroll, with the appropriate PAYE and National Insurance treatment applied where relevant.

The amount you pay yourself is a business decision, but it should be considered alongside the company's wider financial position and your personal circumstances.

For some clinic directors, a regular salary can provide consistency.

You know roughly how much you are receiving each month, which can make personal budgeting easier. The company also has a clear record of what it is paying you for your work.

Your accountant can help you consider an appropriate salary level based on your circumstances and the wider tax position.

The important thing is not to simply copy another business owner's salary.

Your clinic, company structure, profits and personal tax position may all be different.

3. What About Dividends?

Dividends are payments made to shareholders from company profits that are available for distribution.

This is where clinic directors sometimes get caught out.

Having money in the company bank account does not automatically mean you can take that amount as a dividend.

The company needs to have sufficient distributable profits.

For example, your clinic might have £30,000 sitting in its bank account.

That does not necessarily mean you can simply declare a £30,000 dividend.

The bank balance is not the same thing as available profit.

The company may still have tax liabilities, unpaid bills, other commitments or previous losses to consider.

This is why dividends need to be considered from the company's accounts, not just the balance shown in the bank.

4. Why You Should Not Just Take Money When You Need It

This is one of the biggest mistakes I see business owners make.

You need £2,000 personally, so you transfer £2,000 from the clinic account.

Then you need another £1,500 a few weeks later, so you transfer that too.

At the time, it can feel harmless.

The problem comes when nobody has properly recorded what those payments actually were.

• Was it salary?

• Was it a dividend?

• Was it reimbursement for a business expense?

• Was it money taken from the company as a director's loan?

Those are different things.

If you take money first and decide what it was afterwards, you can end up with accounting and tax problems that could have been avoided with a little planning.

5. Dividends Need the Correct Paperwork

Declaring a dividend is not simply moving money from one bank account to another.

The company should have the appropriate records to support the dividend, including evidence that there were sufficient profits available for distribution.

This will normally include dividend documentation and a dividend voucher showing the relevant details.

Your accounting records should also reflect the dividend correctly.

The paperwork matters because it provides evidence of what the payment was and why it was made.

If your clinic is ever reviewed, you want the records to tell the same story as the money movements.

6. What Happens If You Take More Money Than You Should?

If you take money from your company without treating it correctly, it may end up being recorded through the director's loan account.

A director's loan account keeps track of money the director owes to or is owed by the company.

This can be perfectly legitimate when managed properly.

Problems can arise when the balance grows because the director has been regularly taking money from the company without enough salary or dividends being processed.

A large overdrawn director's loan account can have tax and company-law implications, so it should not be treated as a convenient alternative to paying yourself properly.

If your director's loan account is regularly overdrawn, it is worth speaking to your accountant rather than waiting until the year-end accounts are prepared.

7. Your Clinic's Profit Is Not the Same as Your Personal Income

Another important distinction is between business profit and the money you personally receive.

Your clinic might make a strong profit during the year.

That does not mean you should automatically withdraw all of it.

The company may need cash to pay:

• Corporation tax

• Staff costs

• Suppliers

• Rent and other premises costs

• Equipment

• Professional fees

• Future investment

• Other business commitments

A clinic can be profitable on paper and still need cash in the bank.

This is particularly important for growing clinics.

You may want to invest in another treatment room, new equipment, additional staff or marketing. Taking every available pound out of the business can leave you with less flexibility when the next opportunity or unexpected cost comes along.

8. Salary and Dividends Are Not an Either-Or Decision

Clinic directors sometimes ask:

“Should I pay myself a salary or dividends?”

The answer is often more nuanced than choosing one or the other.

Depending on your circumstances, a combination of salary and dividends may be appropriate.

The right balance depends on factors including:

• Your company's profits

• Your personal income

• Other sources of income

• Your available dividend position

• PAYE and National Insurance considerations

• Your wider tax position

• How much cash the business needs to retain

This is why there is no universal salary or dividend amount that works for every clinic director.

The decision should be based on your actual numbers.

9. Keep Your Personal and Clinic Finances Separate

Your clinic should have its own business bank account.

Your personal spending should not simply come out of that account because you own the company.

If you need to pay yourself, do it through the appropriate route.

If you have paid for something personally on behalf of the clinic, record it as a business expense and reimburse yourself properly.

If you are taking money as a dividend, document it as a dividend.

If it is salary, process it through payroll.

Keeping these transactions separate makes your accounts easier to understand and gives you a much clearer picture of how the business is performing.

It also makes your relationship with your accountant much easier.

10. What Should You Review Before Taking a Dividend?

Before paying yourself a dividend, you should have a clear picture of the company's position.

Ask:

• Does the company have sufficient distributable profits?

A healthy bank balance alone is not enough.

• What tax liabilities are coming up?

Corporation tax and other liabilities still need to be paid.

• What other bills does the clinic need to cover?

Do not use today's bank balance without considering tomorrow's commitments.

• How much cash should remain in the business?

Your clinic needs working capital to keep operating.

• What is your personal tax position?

Dividends form part of your personal income and need to be considered alongside your other income.

These questions can help you make a decision based on the whole picture rather than simply what is available in the bank today.

11. Common Mistakes Clinic Directors Make

• Taking money whenever they need it

This can create confusion over whether payments are salary, dividends or director's loan transactions.

• Treating the bank balance as profit

Cash in the bank does not automatically mean the company has profits available for dividends.

• Forgetting about corporation tax

A clinic may have cash available today but a significant corporation tax liability due later.

• Not keeping dividend paperwork

A dividend should be properly documented rather than simply treated as a bank transfer.

• Mixing personal and business spending

Personal purchases from the company account make the accounts harder to manage and can create unnecessary complications.

• Waiting until year-end to understand what they have taken

By then, it may be much harder to correct poor records or plan the most sensible way forward.

12. A Better Way to Pay Yourself

You do not need to make paying yourself complicated.

Start with a plan.

Decide what regular salary makes sense for you and the company.

Review the company's profits regularly.

Keep an eye on upcoming tax and business commitments.

Then consider dividends when you know the company has sufficient profits available and the payment is appropriate.

Most importantly, keep a clear record of every payment you take from the company.

Your accountant should be able to help you understand what you can take, what needs to stay in the business and how the different options affect you personally.

The aim is not simply to take as much money out of the clinic as possible.

It is to pay yourself in a way that works for you and the business.

Frequently Asked Questions

1. Can I just transfer money from my clinic account to my personal account?

You can transfer money, but the payment needs to have a proper accounting treatment. It should not simply be taken without deciding whether it is salary, dividend, reimbursement or another type of transaction.

2. Can I pay myself only through dividends?

Dividends are one way of taking money from a company if you are a shareholder and the company has sufficient distributable profits. Whether dividends alone are appropriate depends on your circumstances.

3. Can I take dividends if there is money in the bank?

Not necessarily. Dividends are paid from distributable profits, not simply from the company's bank balance. Your accounts need to support the dividend.

4. How often should I pay myself?

There is no single frequency that works for every clinic director. Some choose a regular monthly salary and take dividends periodically when appropriate. Your accountant can help you establish a routine that fits your business.

5. What happens if I have taken too much money from the company?

The amount may need to be recorded through your director's loan account, depending on the circumstances. If the account becomes overdrawn, there can be additional tax and reporting considerations, so it is important to deal with it promptly.

6. Should I leave some profit in my clinic?

Often, yes. Your company may need cash for corporation tax, operating costs, investment and unexpected expenses. Taking all available cash out of the business is not always the best decision.

Do Not Guess How to Pay Yourself

Your clinic is your business, but the money in the company is not automatically your personal money.

Salary, dividends and director's loan transactions each have different rules and consequences.

The easiest way to avoid problems is to stop treating your business bank account like a personal account and put a clear process in place for paying yourself.

You should know what you are taking, why you are taking it, and whether the company can afford it.

If you are not sure whether you are paying yourself in the right way, or you want to review how you currently take money from your clinic, send us a message or schedule your free 15 minute discovery meeting at the link below to see how we can help.

https://calendly.com/hello-aestheticaccounts/15min

This article is for general information and should not be treated as advice for a specific clinic. Tax treatment depends on individual circumstances and may change. You should seek professional advice based on your own circumstances.

References

1. HM Revenue & Customs, guidance on employment income, PAYE and directors.

2. HM Revenue & Customs, guidance on dividends and distributions.

3. Companies Act 2006, provisions relating to distributions and company profits.

4. HM Revenue & Customs, guidance on director's loans and company tax treatment.

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