Wenzo guidesWhat are my options for taking money out?
As a director-shareholder you can be paid a salary through the company’s payroll, take dividends as a shareholder, or both. They are taxed differently.
A salary goes through PAYE. A dividend is paid out of profits that have already had Corporation Tax taken off, and is then taxed on you at dividend rates. Money that is neither, and is not a repayment of what you lent the company, usually goes to your director’s loan account.
How is a salary taxed in 2026 to 2027?
HMRC’s rates and thresholds for employers for 6 April 2026 to 5 April 2027 set these yearly figures:
- £5,000 secondary threshold: employer’s National Insurance at 15% is due on salary above this.
- £6,708 lower earnings limit: earnings start to count for your National Insurance record.
- £12,570 Personal Allowance and primary threshold: no Income Tax and no employee’s National Insurance up to this, for most people.
- £50,270 upper earnings limit: employee’s National Insurance drops from 8% to 2% above this.
Want your year end sorted too?
Whatever mix of salary and dividends you take, we prepare your accounts and Company Tax Return, bookkeeping included. It’s £199 for turnover up to £90,000, or £499 for turnover above £90,000.
Find your companyCan my company claim Employment Allowance?
Employment Allowance (£10,500 for 2026 to 2027) can reduce the employer’s National Insurance bill. But GOV.UK’s eligibility rules say that if your company has only one director, they must not be the only employee liable for employer’s National Insurance. So a one-person company with no other staff usually cannot claim it.
How are dividends taxed in 2026 to 2027?
Dividends inside any unused Personal Allowance are not taxed, and the dividend allowance covers the next £500. Above that, GOV.UK’s guide to tax on dividends sets these rates from 6 April 2026:
- Basic rate: 10.75%
- Higher rate: 35.75%
- Additional rate: 39.35%
Dividends are added on top of your salary and other income to work out your band. If your dividends go over your unused Personal Allowance and the dividend allowance, you need to tell HMRC, usually through Self Assessment.
What does a salary and dividend mix look like?
Here is an illustrative example using the rates above, for a director in England with no other income or employees. Your own position depends on your profits, other income and plans.
A salary of £12,570 has no Income Tax and no employee’s National Insurance. The company pays employer’s National Insurance of 15% on £7,570 (the part above £5,000), which is £1,135.50. The salary and that National Insurance are business costs for Corporation Tax.
Add dividends of £30,000 and total income is £42,570, so it all stays in the basic rate band. The first £500 is covered by the dividend allowance, and the other £29,500 is taxed at 10.75%, which is £3,171.25 of personal tax.
Some directors choose a lower salary to avoid employer’s National Insurance, or a higher one for other reasons. The rates change, so the mix is worth looking at each year. Our guide to Corporation Tax rates shows the company side.
What are the rules for paying dividends?
Dividends can only come from profits available for distribution: current and past profits after Corporation Tax. Paying more than that is not a valid dividend. They are paid to shareholders in proportion to their shares, not to directors as such, and they are not a business cost, so they do not reduce the company’s Corporation Tax.
For each dividend, it helps to follow the same simple steps:
- Look at the profits available for distribution.
- Record the directors’ decision (board minutes).
- Keep a dividend voucher for each payment.
How can Wenzo help?
Your annual accounts show the company’s profit for the year and its retained profits, the figure that dividends have to come from. We prepare those accounts and your Company Tax Return, with bookkeeping included, from £199.
If you are not sure whether the money you have taken out was salary, dividends or a director’s loan, tell us when you send your records and we will ask the right questions before anything is filed. See all three prices or call us on 020 7123 9335.
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Need help with your Corporation Tax?
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