{"id":6900,"date":"2026-03-25T10:43:07","date_gmt":"2026-03-25T10:43:07","guid":{"rendered":"https:\/\/www.bainesjewitt.co.uk\/blog\/?p=6900"},"modified":"2026-03-25T10:43:10","modified_gmt":"2026-03-25T10:43:10","slug":"are-you-paying-yourself-as-tax-efficiently-as-possible-in-2026","status":"publish","type":"post","link":"https:\/\/www.bainesjewitt.co.uk\/blog\/are-you-paying-yourself-as-tax-efficiently-as-possible-in-2026\/","title":{"rendered":"Are you paying yourself as tax efficiently as possible in 2026?"},"content":{"rendered":"

Not everyone has the freedom to decide how they are paid or to structure their income in the most tax-efficient way.<\/p>\n

<\/p>\n

So, if you do run your own limited company and have this luxury, you need to make sure you are getting it right.<\/p>\n

Most directors choose to pay themselves through a mix of a salary and dividends.<\/p>\n

With dividend rates going up and Income Tax thresholds frozen until 2031, it might be a good time to review whether your structure is still working efficiently.<\/p>\n

What are the benefits of paying yourself with a salary?<\/strong><\/h3>\n

Salaries are not just a monthly payment that goes into your bank account.<\/p>\n

They can be deducted as a business expense, reduce Corporation Tax liabilities and help maintain National Insurance records for State Pension purposes.<\/p>\n

Many directors choose a salary based around key thresholds, such as \u00a36,500 to secure National Insurance credits or \u00a312,570 to fully utilise the Personal Allowance without triggering Income Tax.<\/p>\n

If your earnings do go above the Personal Allowance, then these Income Tax Rates will apply:<\/p>\n\n\n\n\n\n
Basic rate<\/td>\n20\u00a0per cent<\/td>\nOn earnings from\u00a0\u00a312,571 to \u00a350,270<\/td>\n<\/tr>\n
Higher rate<\/td>\n40\u00a0per cent<\/td>\nOn earnings from \u00a350,271 to \u00a3125,140<\/td>\n<\/tr>\n
Additional\u00a0rate<\/td>\n45\u00a0per cent<\/td>\nOn earnings over \u00a3125,140<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

Also, if your salary goes above certain levels, it can lead to employee and employer National Insurance contributions and this will increase the overall costs to your business.<\/p>\n

How is taking dividends more tax-efficient? <\/strong><\/h3>\n

Dividends are a big part of a director\u2019s income and these rates are going up in the 2026\/27 tax year.<\/p>\n

From April 2026, the new dividend tax rates are:<\/p>\n\n\n\n\n\n
Basic rate<\/td>\n10.75 per cent<\/td>\nOn earnings from\u00a0\u00a312,571 to \u00a350,270<\/td>\n<\/tr>\n
Higher rate<\/td>\n35.75 per cent<\/td>\nOn earnings from \u00a350,271 to \u00a3125,140<\/td>\n<\/tr>\n
Additional\u00a0rate<\/td>\n39.35 per cent<\/td>\nOn earnings over \u00a3125,140<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

Even though these rates are going up, it is still more tax-efficient to take dividends alongside a salary than just taking a salary on its own.<\/p>\n

This is mainly because dividends are not subject to National Insurance and the tax rates are significantly lower than those for Income Tax.<\/p>\n

However, they can only be paid from retained profits after Corporation Tax, so your company must be performing well enough to support this.<\/p>\n

You also need to ensure that you are declaring your dividends properly with the right documentation and reporting them through your Self-Assessment tax return.<\/p>\n

How can we support you?<\/strong><\/h3>\n

There is no perfect structure that works for all directors and finding that balance can feel stressful, especially with changing rates being added to the mix.<\/p>\n

Our professional team are here to support you by reviewing your salary and dividend strategies and ensuring your income is structured as efficiently as possible.<\/p>\n

We will also assess that you are declaring your pay properly, so you can continue to reap the rewards and not stress about any compliance issues arising.<\/p>\n

For further advice on dividends and paying yourself, contact our team today.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Not everyone has the freedom to decide how they are paid or to structure their income in the most tax-efficient way.<\/p>\n","protected":false},"author":2,"featured_media":6432,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24,125],"tags":[],"_links":{"self":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6900"}],"collection":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=6900"}],"version-history":[{"count":1,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6900\/revisions"}],"predecessor-version":[{"id":6901,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6900\/revisions\/6901"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/media\/6432"}],"wp:attachment":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=6900"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=6900"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=6900"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}