Most directors are the last person to get paid when cash is tight. You prioritise staff wages, suppliers and HMRC because you feel responsible for everyone else before yourself.
Not being able to pay yourself from your own company is one of the clearest signs that something isn’t right. If your company can’t afford to pay you, it’s important to understand when it becomes a warning sign of insolvency, and how to take control without putting yourself at risk.
Common reasons directors stop paying themselves include:
- Cash flow being tied up in unpaid invoices
- Seasonal drops in income
- Rising costs squeezing margins
- HMRC arrears building up
- Loan repayments becoming unaffordable
In isolation, a short gap in pay doesn’t always mean the business is failing. Many healthy companies go through brief periods where directors tighten their belts. The problem is when not paying yourself becomes the norm rather than the exception.
When not paying yourself becomes a red flag
If your company regularly can’t afford to pay you, it’s usually a sign of cash-flow insolvency. This means the company cannot meet its obligations in full and as they fall due, even if it still has work coming in or assets on paper.
Typical warning signs include:
- You haven’t paid yourself for several months
- VAT or PAYE is overdue
- Suppliers are being paid late or in part
- You’re relying on personal funds to keep the business going
- You’re choosing which bills to pay each month
At this point, the issue is no longer just about personal income. It’s about whether the company can realistically continue trading without making the situation worse.
Salary vs dividends when money is tight
How you pay yourself matters, especially when finances are under pressure.
Director’s salary
A director’s salary is a contractual cost. If the company genuinely can’t afford to pay wages, stopping your salary may be appropriate.
However, unpaid wages can still build up as a liability, especially if payroll submissions continue to show pay that isn’t actually received. If the company can’t afford to pay salaries on time, this is a strong indicator of insolvency.
Dividends
Dividends can only be paid from distributable profits. If the company has no profits, or is insolvent, paying dividends is not allowed.
Taking dividends when the company can’t pay its debts can lead to:
- Illegal dividend claims
- Personal liability to repay the money
- Increased scrutiny in a later liquidation
If you’ve stopped taking dividends because there are no profits, that’s sensible. If you’re still taking dividends while creditors go unpaid, that’s a serious risk.
Can I keep trading if I’m not paying myself?
Not paying yourself does not automatically mean you must stop trading. But it does mean you need to look carefully at whether the business is still viable and try to identify insolvency.
As a director, your legal duties change once the company becomes insolvent. At that point, you must act in the best interests of creditors, not shareholders or yourself.
Continuing to trade may be appropriate if:
- The business has a realistic plan to return to profitability
- Creditor arrears are temporary and manageable
- No new debt is being taken on irresponsibly
Continuing to trade becomes risky if:
- Debts continue to grow with no clear way to repay them
- HMRC arrears are increasing
- You’re funding the business personally just to survive
- There is no credible turnaround plan
In those circumstances, carrying on without advice can expose you to wrongful trading claims.
Using personal money to keep the business going
Some directors dip into savings, take personal loans or even remortgage their home to prop up the company when they stop paying themselves. This can feel like the responsible thing to do, but it often increases personal risk.
Common issues include:
- Informal loans to the company that are never repaid
- Director’s loan accounts becoming complex or overdrawn
- Personal guarantees being triggered later
If you’re regularly using personal funds to cover company costs, it’s a sign the business is not self-sustaining. At that point, professional advice is essential before you put more of your own finances at risk.
What HMRC thinks when you can’t pay yourself
HMRC often sees unpaid director wages or reduced pay as an early indicator of insolvency, especially when PAYE or VAT is overdue.
From their perspective:
- PAYE and VAT are trust taxes
- Missed payments suggest cash-flow failure
- Repeated arrears reduce their willingness to negotiate
A Time to Pay arrangement can help in some cases but it only works if the business can afford both future taxes and the repayment plan. If you can’t afford to pay yourself, it’s often a sign that a Time to Pay arrangement may not be sustainable either.
Options if your company can’t afford to pay you
Once you accept that not paying yourself isn’t temporary, it’s time to look at structured options.
Review viability honestly
Start with the numbers, not hope. Ask:
- Can the business realistically pay all debts going forward?
- Is there enough margin once costs are stripped back?
- Are arrears reducing or increasing?
If the answer is unclear, get an independent view from a qualified insolvency practitioner.
Restructuring your business and debts
If the business is viable but needs breathing space, formal rescue options may help:
- Company Voluntary Arrangement (CVA) can restructure debts into affordable repayments
- Where there is value to preserve, Administration can provide legal protection while an insolvency practitioner restructures the business or sells it to preserve value.
These options allow trading to continue but only where there is a genuine prospect of recovery.
Closing the company properly
If the business cannot afford to pay you because it cannot afford to pay anyone, liquidation is often the most responsible route.
If you’ve acted responsibly as a director and fulfilled your director’s duties, Creditors’ Voluntary Liquidation (CVL) can:
- Stops creditor pressure
- Draws a line under unmanageable debts
- Protects you from worsening the position
- Allows you to move on without ongoing stress
Key takeaways if you can’t afford to pay yourself from your company
- If your company can’t afford to pay you, it’s often an early sign of cash-flow insolvency
- Dividends must only be taken from distributable profits, taking them when creditors are unpaid increases personal risk
- Using personal funds to support the company often worsens your position rather than fixing the problem
- Once insolvency is likely, your legal duty shifts to protecting creditors’ interests
- Continuing to trade without a realistic recovery plan can lead to wrongful trading issues
- A Creditors’ Voluntary Liquidation is often the safest way to close an insolvent business and draw a line under the debt
Get advice if you can’t afford to pay yourself
If your business can’t afford to pay you, it’s telling you something important. Ignoring it rarely leads to a better outcome.
Speaking to a qualified insolvency practitioner doesn’t commit you to liquidation. It gives you clarity. You’ll understand whether the business can recover, whether restructuring is realistic, or whether closing the company is the safest way forward.
We offer free, confidential advice for directors in exactly this position. We’ll look at your situation honestly, explain your options in plain English, and help you decide the next step that protects both you and your creditors.
If you’ve reached the point where you can’t afford to pay yourself, don’t wait for things to deteriorate further. Get advice and take back control.
