Everything you need to know about CIC director salaries, PAYE, expenses, dividends and good governance.
One of the most common questions we’re asked by people setting up a Community Interest Company is surprisingly simple:
“Can I actually pay myself?”
Yes, CIC directors can be paid. A CIC is still a limited company, so there’s no rule forcing directors to work for free. What changes the picture is the asset lock: any pay has to be reasonable, tied to real work, approved by the board, and properly recorded.
It’s understandable why people ask in the first place.
A Community Interest Company exists to benefit the community rather than its owners, so many new directors assume they have to volunteer their time indefinitely or that paying themselves is somehow prohibited. Neither is true but the reason for the confusion is fair: nothing about being labelled “not-for-profit” is intuitive when it comes to your own pay packet.
Others go to the opposite extreme; they simply transfer money from the company’s bank account when they need it, believing that because they’re the director, they’re entitled to do so. This isn’t right either being a director doesn’t, by itself, entitle you to payment. You’re paid for the work you do, not the title you hold, and that payment still needs to go through the proper channels (usually PAYE).
The good news is that the rules are much simpler than many people think and with 37,081 CICs now on the public register, a 12% rise on the previous year, this is a question a growing number of directors are asking (Regulator of Community Interest Companies, Annual Report 2024 to 2025).
At Carter Collins & Myer, we advise well over 100 charities and Community Interest Companies across the UK. Over the years we’ve seen the same misunderstandings crop up time and again. Fortunately, they’re usually easy to avoid once you understand how a CIC works.
This guide explains, in plain English, how CIC directors can legally pay themselves, when payroll is required, what expenses can be claimed, whether dividends are possible, and the governance rules every director should understand.
The Short Answer
The Short AnswerYes, in most cases, a CIC director can absolutely be paid for the work they carry out.
However, there are some important conditions, the remuneration should be:
- Genuine work undertaken;
- Reasonable in the circumstances;
- Properly authorised;
- Correctly recorded;
- Paid through the appropriate tax system; and
- Consistent with the CIC’s community purpose.
The sector needs that leadership more than ever: the CIC Regulator approved a record 8,376 new CICs in 2024–25 alone, a 14% rise on the year before, every one of them needing someone capable at the helm.
A Community Interest Company Is Still a Limited Company
One of the biggest myths surrounding CICs is that they’re simply charities with a different name. They aren’t, although both charities and Community Interest Companies exist for public benefit, they operate under different legal frameworks.
A CIC is still a limited company, it still has directors, it still files annual accounts. It still submits Corporation Tax returns; it still has employer responsibilities if it pays staff.
It still has to comply with company law. The additional feature is that the company must operate primarily for community benefit and is subject to the CIC asset lock and regulation by the Office of the Regulator of Community Interest Companies.
None of that prevents directors being paid appropriately for the work they perform.
Why Directors Are Often Paid
Many people establish a CIC because they’re passionate about improving something, perhaps it’s supporting young people, running a sports club, providing community transport, helping older people, supporting mental health, delivering arts projects, whatever the purpose, somebody still has to run the organisation, that usually means directors are responsible for:
- Securing funding
- Preparing grant applications
- Managing employees and volunteers
- Overseeing safeguarding
- Dealing with suppliers
- Ensuring legal compliance
- Managing finances
- Preparing budgets
- Attending board meetings
- Delivering projects
- Planning the future of the organisation.
That’s genuine work, it’s entirely reasonable that directors receive appropriate remuneration for carrying it out.
How Should a CIC Director Be Paid?
For the vast majority of CICs, the correct answer is simple, through PAYE payroll. The CIC registers as an employer with HMRC. The director becomes an employee (often whilst also remaining a statutory office holder).
Salary is processed through payroll, Income Tax and National Insurance are calculated where applicable, Real Time Information (RTI) submissions are sent to HMRC.
Everything is transparent and properly documented. Many first-time directors worry that payroll sounds complicated, it really isn’t.
Modern payroll software handles most of the administration automatically, and many accountants operate payroll for clients at a relatively modest monthly cost.
Trying to avoid payroll often creates far more work than simply operating it correctly from the outset.
Can a Director Simply Transfer Money from the Company’s Bank Account?
No, this is probably the most common mistake we encounter. A director sees money in the company’s bank account and transfers some into their personal account because they’ve been working hard and need paying.
Unfortunately, accounting doesn’t work like that, every payment needs to be correctly categorised. If it isn’t salary:
- What is it?
- A loan?
- Expenses?
- Dividends?
- Reimbursement?
Without proper records, the accounting quickly becomes confused.
Before long, payroll hasn’t been operated, HMRC hasn’t been informed, the bookkeeping no longer reflects reality, and the year-end accounts become much harder and more expensive to prepare.
The safest approach is always to decide how directors will be remunerated before money starts moving.
Expenses Are Not Salary
It’s important to distinguish between remuneration and reimbursement, if you personally pay for something on behalf of the CIC, you’re usually entitled to claim it back. Typical examples include:
- Business mileage;
- Train fares;
- Hotel accommodation;
- Parking;
- Stationery;
- Office supplies;
- Training courses;
- Professional subscriptions;
- Small items purchased for projects; and
- Other legitimate business expenditure.
Provided the expense was wholly and exclusively incurred for the CIC’s activities, supported by receipts and properly recorded, reimbursement generally isn’t treated as taxable income.
You’re simply recovering money you’ve already spent, that is completely different from being paid for your time. Keeping these two categories separate makes the bookkeeping far cleaner and demonstrates good governance.
Can You Invoice Your Own CIC Instead of Running Payroll?
This question comes up surprisingly often, some directors believe they can avoid payroll simply by registering as self-employed and sending invoices to their own company.
Sometimes that arrangement can be appropriate, often it isn’t, HMRC looks at the actual working relationship, not simply the paperwork. If you’re:
- Directing the organisation;
- Making strategic decisions;
- Working regularly within the CIC;
- Representing it publicly; and
- Carrying out the duties expected of a director,
Then simply issuing invoices may not reflect the true legal position, employment status is a complex area and each situation depends on its own facts. However, for many CIC directors, operating PAYE remains the most appropriate and transparent solution.
If you’re unsure, it’s worth taking advice before setting up arrangements that may later need correcting.
Can CIC Directors Take Dividends?
This is another area where there is a great deal of confusion, the answer depends on the type of CIC you’ve established. Most CICs are limited by guarantee. These have no shareholders and therefore cannot pay dividends.
Some are limited by shares, these can pay dividends, but unlike an ordinary limited company they are subject to statutory restrictions designed to protect the company’s community purpose.
The dividend cap rules have changed over the years, and the ability to pay dividends depends upon the company’s constitution and the legislation in force.
In practice, most CIC directors are remunerated primarily through salary rather than dividends. If you’re considering paying dividends from a CIC limited by shares, professional advice is highly recommended.
Who Decides How Much a Director Is Paid?
This is where governance becomes just as important as tax, one question we’re often asked is:
“Can I simply decide my own salary?”
Not quite, directors owe legal duties to the company, any remuneration should be properly authorised.
That usually means:
- Declaring any conflict of interest
- Ensuring the board considers the proposal
- Recording the decision in board minutes
- Documenting the reasons for the remuneration
- Ensuring the amount is reasonable for the work undertaken
Good governance isn’t about creating paperwork for the sake of it. It’s about protecting both the organisation and its directors if decisions are questioned later by funders, regulators or HMRC.
What Does “Reasonable” Mean?
The legislation doesn’t prescribe salary levels, instead, directors should ask themselves sensible questions.
- Does the salary reflect the work actually undertaken?
- Could it be justified to an independent observer?
- Can the CIC genuinely afford it?
- Does paying this salary still allow the organisation to fulfil its community purpose?
A director working full time managing a multi-million-pound CIC obviously has different responsibilities from someone attending four board meetings each year.
Common Mistakes We See
Most problems don’t arise because directors deliberately break the rules.
They happen because nobody explained the rules properly.
- Paying directors informally
Money leaves the company bank account with no explanation or supporting records. - Delaying payroll
Waiting until the end of the tax year often creates unnecessary complications. - Mixing salary and expenses
Business reimbursements become confused with remuneration. - Poor bookkeeping
Without accurate records, annual accounts become harder to prepare and governance becomes difficult to demonstrate. - Forgetting Corporation Tax
Being community-focused doesn’t automatically exempt a CIC from Corporation Tax. - Assuming “not-for-profit” means “tax-free”
It doesn’t, a CIC is not automatically exempt from tax simply because it exists for community benefit.
What About Volunteers?
Many CICs rely heavily on volunteers, that’s perfectly normal. Volunteers can usually be reimbursed for genuine out-of-pocket expenses without becoming employees.
However, once regular payments start being made for work undertaken, it’s worth reviewing whether payroll obligations arise, again, the facts matter.
Why Good Record Keeping Matters
They are also essential when preparing and filing your annual CIC accounts. For a step-by-step overview of the process and key requirements, read our guide on how to file CIC accounts properly.
They’re also important for:
- Grant applications;
- Independent examinations;
- Audits;
- Funding bids;
- Board reporting;
- Demonstrating impact; and
- Protecting directors.
Funders increasingly expect organisations to demonstrate strong financial management.
Good payroll and accounting systems help build confidence that the CIC is being run professionally.
Before You Pay Yourself
Before taking a salary, ask yourself:
- Has the board approved the remuneration?
- Has any conflict of interest been properly managed?
- Have we documented the decision?
- Is payroll registered with HMRC?
- Is the salary reasonable?
- Are expenses recorded separately?
- Can we comfortably afford the payment?
- Does it remain consistent with the CIC’s community purpose?
If you can’t confidently answer “yes” to each question, it’s worth reviewing the arrangements before making payments.
Final Thoughts
The myth that CIC directors cannot pay themselves simply isn’t true.
Community Interest Companies need capable people to run them, and those people are entitled to receive reasonable remuneration for genuine work undertaken.
The important part is making sure payments are properly authorised, correctly processed through payroll where appropriate, accurately recorded, and supported by good governance.
Get those foundations right and you’ll spend far less time worrying about compliance and far more time concentrating on what really matters delivering benefit to your community.
Need guidance on your CIC’s payroll, remuneration or governance? Carter Collins & Myer can help, with experience advising 100+ charities and CICs across the UK, we can provide clarity and peace of mind.
Need Advice on Running a Community Interest Company?
At Carter Collins & Myer, we advise well over 100 charities and Community Interest Companies, from newly established organisations to long-established CICs employing significant numbers of staff.
Whether you’re setting up your first payroll, reviewing director remuneration, applying for funding, preparing annual accounts or simply want to make sure you’re doing things properly, we’d be delighted to help.
Sometimes a short conversation at the beginning saves a great deal of time, cost and stress later on.