How to Pay Yourself as a CIC Director

A CIC is a company, not a charity, so its directors are not volunteers by default. The CIC Regulator's guidance says: “Directors may be paid remuneration (which includes a salary) for their services to a CIC.” Four conditions come with that.

• Reasonable. Remuneration “should never be more than is reasonable” for the work done and for what the CIC can afford. Paying directors more than their work is worth to the company can breach the asset lock.
• Transparent. The arrangements “should always be transparent”. Agree pay in the way your articles require, usually a board decision recorded in the minutes, with the director concerned not voting on their own pay.
• Disclosed. Directors' remuneration is reported in the annual CIC34, which is public.
• Open to challenge. “The Regulator, or the members of a CIC, may take action if a CIC director's remuneration appears to be too high.”

One more rule: a CIC limited by guarantee has no shares, so it cannot pay dividends. Directors of a guarantee CIC are paid for work, never for ownership.

If you are still at the planning stage, check your name is free and carry it into the guided questions. Already registered? Skip to the pay rules below.

HMRC treats company directors as office holders, so anything the CIC pays you for being a director is taxed through PAYE, and so is any salary for a delivery role under an employment contract. This is the default for most paid CIC directors.

How it works

1. Register the CIC as an employer with HMRC before the first payday.
2. Run payroll each pay period with HMRC's free Basic PAYE Tools or commercial payroll software, and report each payment to HMRC on or before payday.
3. Deduct income tax and employee National Insurance and pay them to HMRC with employer NI.
4. Record the decision to pay yourself in the board minutes.

Employer National Insurance

For the 2026 to 2027 tax year the employer Class 1 rate is 15% on earnings above the secondary threshold of £96 a week. Budget for it: a salary costs the CIC more than the figure on the payslip. Check whether the CIC can claim the Employment Allowance. A company with only one director cannot claim it if that director is the only employee paid above the secondary threshold.

You cannot invoice your own CIC for being its director; that pay is office-holder income and goes through PAYE. You can invoice for a separate piece of work only if that work is genuinely self-employed on HMRC's employment status tests. Typical examples are a specialist service you also sell to other customers, delivered under a written contract for a defined project.

What HMRC looks at

• Whether the CIC controls how, when and where you do the work.
• Whether you could send someone else to do it.
• Whether you carry financial risk, provide your own equipment and correct mistakes at your own cost.
• Whether you work for other clients. Having only one client is one indicator among several.

Run each engagement through HMRC's Check Employment Status for Tax tool and keep the result. If the answer is employed, use PAYE. Getting this wrong leaves the CIC liable for the tax and NI it should have deducted.

If you do invoice

• Have a written contract for the work that is separate from your director role.
• Invoice with your name or trading name, a description of the work, dates, rate and total.
• Register for Self Assessment and declare the income on your tax return.
• Declare the arrangement to the board and record it in the minutes and the CIC34.

• Only if it is in the budget. A grant can pay you if the application budget included a line for your role and the funder agreed it. Read the funder's terms on staff and freelance costs before you apply. Our CIC funding guide explains what funders look for.
• Match the method to the wording. If the grant budgets a salaried coordinator, pay through PAYE. If it budgets a freelance facilitator, invoice, provided the work passes HMRC's tests.
• Keep restricted funds separate. Track each grant in your accounts so you can show the funder how every pound was spent. Mixing pots makes reports hard and can breach the grant terms.
• Expect scrutiny. Funders and the CIC Regulator can both ask questions about director pay. Reasonable, minuted and disclosed pay survives those questions.