How to Pay Yourself When Your Business is Making a Loss

21 January 2022

The world of business is unpredictable. Not every step is a success and as an SME owner, reacting to the bad times will test your resolve. But as a director, how much pay should you sacrifice personally for the success of your business? Depending on your specific situation, you have a few options for paying yourself as a director when your business is losing money.

Create a Financial Forecast


Our first recommendation is to create a forecast if you haven’t already. If you’re not sure where to start, read our article on how set up a forecast here. This will give you a clear view of how long you expect the business to be making a loss so that you can make more informed decisions about your next steps. Establishing a timeline will help you piece of mind that the problem is only temporary

An accurate forecast will allow you to conduct better risk analysis and plan for various scenarios, which might even mean you already have the answers you need when something changes unexpectedly.



The first thing to acknowledge is how much cash you have in the bank, and the level of Retained Earnings (sometimes known as Reserves).. We recommend directors pay themselves a baseline salary, which falls under the national insurance threshold, and top that up with dividends. If you have the savings to continue with this, and the reserves, then you should as it’s the most tax efficient option over all.



If you don’t have a substantial amount saved up, then paying yourself a salary may be the next best option. Assuming you have enough to pay your suppliers and employees, and any other legal commitments you have made, then you can make up a liveable salary through PAYE payments. 


While this might be a fine short term solution, it should be noted that we don’t recommend it longer term as it will likely cost you more in tax and national insurance over time. 


Look for Funding


Your sales and income may turn around quickly, but the search for outside funding could give you some breathing room, and allow you to take less of a personal hit financially. 


There are various options for outside funding:

  • Grants
  • Investors
  • Bank loans, against the company or personally as the director


The type of funding you should look for really depends on your specific situation. If you are a brand new startup, as long as you have a solid forecast in place, there are plenty of options open to you. However, if you’re a more mature business which has taken a hit then you may need to prove your viability for the future. When COVID struck, it took a huge toll on many businesses, but there were special government grants available, and banks were somewhat more lenient, because it was widely accepted that the disruption would be temporary. If you believe that the disruption to your profit is just as temporary, be ready to prove it.

The Bottom Line


Ultimately, your options are limited when it comes to paying yourself from a business making a loss, but it’s not impossible. If you find yourself lost, get some expert advice to avoid digging the hole any deeper. 


At FD Works, we partner with ambitious business owners, whatever stage of business they are at. If you’d like to get in touch, drop us a line at 01454 300 999 or email us at

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