How much of the money in my consulting company is actually mine to take?

Written for independent consultants trading through their own companies, interim and fractional executives, and boutique consultancies that work with associates.

The short version

1. Split every receipt the day it lands.Set aside the VAT, then Corporation Tax on the profit. What is left is yours to plan with, before personal tax.
2. Plan cash on the dates clients pay.Use a 13-week view built on payment dates, not invoice dates. Put in every tax bill, cost and planned dividend to see gaps coming.
3. Sort an overdrawn loan account early.Well before the nine-month date, choose with your accountant: repay, a dividend your reserves can support, salary, or leave it and budget for tax.

Consulting income arrives in lumps: a large invoice, then a gap between contracts. The company account can look full while much of it is already spoken for. A 13-week cash view shows you the gap coming. Build it on the dates clients actually pay, not the invoice dates, and put in every lumpy outgoing: associate and payroll costs, VAT, Corporation Tax, any tax on your loan account, the dividends you plan to take, and the gaps between contracts.

Split each invoice the day it is paid

In that example only £5,880 of a £10,800 receipt is yours to plan with, and personal tax on whatever you then draw still has to come out of it.

Paying yourself: salary, dividends and pension

As of Oct 2026, a company whose only employee is the director cannot claim the Employment Allowance, so every pound of salary over £5,000 costs 15% employer NI. Two salaries are common: £12,570, which uses the personal allowance and costs £1,135.50 of employer NI, or £6,708, the lower earnings limit, which still earns a qualifying year for the State Pension and costs £256.20.

As of Oct 2026, in a worked example at 2026 to 2027 rates with £100,000 of profit before the director's pay (England, a 12-month accounting period, no associated companies, dividends taken to the top of the basic rate band), both salaries leave £46,271 in your hand, but the higher salary keeps £907.15 more in the company, because the Corporation Tax it saves at the 26.5% marginal rate beats its employer NI. With profits in the 19% band the answer can flip, so have it rerun at your numbers.

Employer pension contributions are the third lever. As of Oct 2026 they carry no NI, are deductible for Corporation Tax when made wholly and exclusively for the business, and count towards your £60,000 annual allowance. For example, £20,000 paid in a year when profits sit in the marginal band saves £5,300 of Corporation Tax. If you own a second consulting company, the £50,000 and £250,000 Corporation Tax limits are split between the two.

The loan account trap

Worked example: £40,000 overdrawn at a 31 March 2027 year end, all of it lent on or after 6 April 2026, and still unpaid on 1 January 2028 costs £14,300, due with the Corporation Tax on that date. Repay it the next day and the refund is still not due until 1 January 2029, so that cash is out of the business for at least a year; repay after 31 March 2028 and it is out for longer.

As of Oct 2026, a repayment of £5,000 or more redrawn within 30 days is ignored, so the charge still falls due: £14,300 on the £40,000 in the worked example. Where the balance is £15,000 or more and you mean to borrow again, repayments are matched against the new drawings (CTA 2010 s.464C).

Two VAT choices that change your cash

• Cash accounting means you account for VAT on cash received, which suits slow-paying clients. As of Oct 2026 you can join below £1.35 million of taxable turnover.
• The Flat Rate Scheme looks cheap at the 14% management consultancy rate, but most consultants are limited cost traders (relevant goods, including VAT, under 2% of VAT-inclusive turnover, or over 2% but under £1,000 a year) and pay 16.5% (15.5% until the day before the first anniversary of VAT registration). As of Oct 2026, on £100,000 of fees plus £20,000 VAT, the scheme pays £19,800 against £19,000 on the normal basis with £1,000 of input VAT, so it costs you £800. The test applies every VAT period.

Asked in Greymill

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