Smarter Director Pay
The Optimal Salary Levels That Matter
If you run a limited company, how you pay yourself is one of the biggest financial decisions you’ll make next year.
The new tax year brings a key shift for UK limited company directors. Dividend tax is rising, which means your usual salary, dividend split will cost more even if your income stays the same. The structure still works, but the margin is tighter. Getting the numbers right matters.
Why Dividends Cost More
From April 2026, dividend tax rates increase by two percentage points. Basic rate moves from 8.75 to 10.75 per cent and higher rate rises from 33.75 to 35.75 per cent. The additional rate stays the same. Any profits you take as dividends will now attract more tax.
The Optimal Salary Levels
The thresholds that matter are frozen, so the core strategy remains:
• £12,570 – still the most efficient salary. It uses your Personal Allowance, secures your State Pension year and gives the company Corporation Tax relief.
• £6,500 – protects your pension with almost no NICs.
• £5,000 – avoids NICs entirely but doesn’t count as a qualifying pension year.
Most directors should continue with £12,570 salary + dividends up to £50,270.
How to Reduce the Impact
The smartest move now is to redirect profit into company-paid pension contributions. They cut Corporation Tax and avoid the higher dividend rates. If your spouse has unused allowances, shared dividends can also lower the household tax bill.
Review your remuneration plan before April 2026 to stay tax-efficient.
#HighwoodsGroup #SustainableGrowth #Leadership #ProfitStrategy
