If you run a Community Interest Company (CIC), chances are you’ve wondered: how do I actually pay myself without breaking the rules? One of the biggest myths is that directors can simply treat themselves as self-employed and invoice their own CIC. In reality, HMRC does not allow this — you’re an office holder, not a freelancer, and payments must go through the proper channels.
Unlike ordinary companies, CICs carry a duty to reinvest profits for community benefit, which means every decision about director pay is watched closely by regulators, funders, and the public. Get it wrong, and you risk reputational damage or even regulatory action. Get it right, and you can fairly reward your work while keeping your CIC on solid ground.
Understanding Director Pay in a CIC
CICs are not charities
One of the biggest misconceptions is that directors of CICs must work for free. That’s not true. While most charities prohibit directors (trustees) from taking a salary, CIC directors can be paid for their work. The key difference is that CICs are set up as companies limited by guarantee or shares, with the added safeguard that profits are locked in for community benefit.
The legal guardrails
CICs must always operate transparently, and that includes how directors are rewarded. The CIC Regulator requires annual disclosure of director pay in the CIC34 report. Companies House also keeps a record of your accounts and governance filings, making them publicly available. This visibility is deliberate — it ensures your pay remains reasonable and in line with your community mission.
Common Ways Directors Pay Themselves
Salary through PAYE
The most straightforward way is to put yourself on payroll, just as you would for any employee. You’ll pay Income Tax and National Insurance, and your CIC may also need to contribute to a pension scheme. The pitfall? Some directors forget that once you’re on PAYE, you must meet all HMRC deadlines — late filings or underpayments can quickly rack up penalties.
Dividends under restrictions
CICs limited by shares can pay dividends, but unlike ordinary companies, there’s a cap. The maximum dividend is 35% of distributable profits, and only after community obligations are met. Exceeding this cap can trigger sanctions from the CIC Regulator and undermine your community credentials. For most CICs, dividends are not the main route for director reward.
Expenses – what’s allowed and what isn’t
Reimbursing yourself for genuine business expenses is perfectly acceptable. This includes travel, office supplies, or software used exclusively for the CIC. The danger comes when expenses blur into personal costs — treating family trips, meals, or personal bills as “business expenses” is both non-compliant and a red flag for HMRC.
Pitfalls Directors Should Avoid
Believing you can invoice your CIC as “self-employed”
This is one of the most common errors. Directors cannot simply invoice their CIC as if they were outside contractors. HMRC will usually reclassify these payments as employment income, and failing to run them through payroll could trigger back-taxes, penalties, and interest.
Paying yourself “too much”
There’s no fixed salary cap in law, but the CIC Regulator expects pay to be “reasonable.” If your salary looks excessive compared to similar roles in charities or small businesses, you could face scrutiny. Funders may also be reluctant to support a CIC where director pay seems disproportionate to community impact.
Ignoring proper approvals
A common mistake is deciding your own pay without oversight. Pay decisions must be approved by the board and recorded in minutes. If your CIC has multiple directors, none should set their own pay in isolation. Failing to document this properly could expose you to accusations of conflict of interest.
Mixing personal and business funds
Running personal expenses through the company or failing to separate bank accounts is one of the quickest ways to damage your CIC’s reputation. It also creates messy records and leaves you exposed if HMRC investigates. Always keep personal and business finances separate.
Forgetting tax and compliance
Some directors assume that because they’re “not-for-profit,” they’re exempt from tax obligations. Not true. PAYE, Corporation Tax, and even VAT still apply if your CIC meets the thresholds. Missing deadlines can cost your organisation money better spent on your community projects.
Best Practices to Stay on the Safe Side
Benchmark your role fairly
Before deciding on pay, compare your role with similar organisations — whether that’s small charities, CICs, or social enterprises. This gives you evidence that your pay is fair, proportionate, and defensible if questioned by funders or regulators.
Be transparent with the community
Your annual CIC34 report requires you to disclose director remuneration. Treat this not just as a compliance exercise but as a chance to build trust. Being open about what you earn and why shows accountability and strengthens your CIC’s reputation.
Work with specialist advisers
CIC rules sit at the crossroads of company law, charity-style regulation, and tax law. It’s easy to get tripped up if you’re unfamiliar with the details. An accountant experienced in CICs can help you navigate PAYE, expenses, and reporting requirements, leaving you free to focus on your mission.
FAQs – Director Pay in a CIC
Can CIC directors take both salary and dividends?
Yes, if structured properly. Most take a salary via PAYE, and dividends are possible in CICs limited by shares (but capped).
Is there a legal limit on CIC director pay?
There’s no hard cap, but pay must be reasonable and justifiable in line with your CIC’s size and income.
Do all CIC directors have to be unpaid volunteers?
No. Directors can be volunteers, paid employees, or a mix — it depends on the CIC’s needs and resources.
What happens if I accidentally overpay myself?
The CIC may need to recover the excess, and you may have to correct disclosures in your annual return. Repeated issues could invite regulatory intervention.
How often must pay decisions be reported?
Formally, once a year in your CIC34 report. But every time pay is reviewed or approved, it should also be recorded in board minutes.
How We Can Help
At KG Accountants, we specialise in Community Interest Companies and understand the fine balance between rewarding directors and protecting the community purpose. We provide clear advice on pay structures, tax, and reporting, so you avoid pitfalls and stay focused on your mission.
Call us today on 0207 078 7477 or complete our enquiry form to book a FREE initial consultation — we’ll help you keep everything compliant and running smoothly.
Categories: CIC Directors, Community Interest Companies, Director, Director Pay, Director Wage, Payroll
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