How to pay yourself from a limited company in 2026/27

This is the question every director asks and the one most people get half an answer to. The honest version is not a single number. It is a set of decisions taken in the right order, and the rates changed on 6 April 2026, so anything written before then is now out of date.

Money leaves your company by four doors

Salary. Dividend. Repayment of money the company already owes you. Expenses. There are rarer ones your accountant may use, such as rent, interest or a pension contribution, and every one of them has its own rules and its own tax.

Pick the door before the money moves. An unlabelled transfer out of the business account gets labelled for you later, usually as a director’s loan, and rarely in your favour.

The salary most directors take

£12,570 a year. It uses the whole personal allowance, there is no employee National Insurance on it, it earns you a qualifying year toward the State Pension, and the company gets corporation tax relief on it.

For a sole director with no Employment Allowance, the company pays employer National Insurance at 15% on the slice above the £5,000 secondary threshold, which is £1,135.50 a year. The corporation tax relief on the salary and on that National Insurance still outweighs it at every rate.

The honest caveat: the net benefit over a lower salary is modest, and it depends entirely on your other income. If you have rental income, a pension in payment or another job, a lower or nil salary can be the better answer. This is a starting point, not a conclusion.

The £10,500 allowance most one director companies cannot claim

The Employment Allowance is £10,500, and it wipes out a large chunk of employer National Insurance. The catch is the one people miss: you cannot claim it if the only person paid above £5,000 is a single director.

Put a second person on the payroll above that threshold, doing genuine work at a commercial rate, and it unlocks. This single rule catches more owner managed companies than anything else on this page, and it is worth checking before you set next year’s payroll rather than after.

What changed on dividends in April 2026

The dividend rates went up two points at the bottom and in the middle:

• Dividend allowance: £500
• Basic rate: 10.75%, up from 8.75%
• Higher rate: 35.75%, up from 33.75%
• Additional rate: 39.35%, unchanged

Corporation tax sits underneath all of that at 19% on profits under £50,000, 25% on profits over £250,000, and marginal relief in between at an effective rate of about 26.5%.

What extraction actually costs

Here is the part that gets misrepresented constantly, usually by comparing a corporation tax rate against an income tax rate as if they were alternatives. They are not. Company profit is taxed once inside the company and again when you take it out. The only honest way to state it is to follow the same £100 all the way home.

Take £100 of company profit at the main rate and bring it out as a dividend:

• Higher rate owner: you keep about £48.19, so roughly 51.8% is gone.
• Additional rate owner: you keep about £45.49, roughly 54.5% gone.
• Basic rate owner: you keep about £66.94, roughly 33.1% gone.

That is not an argument against having a company. It is the reason the extraction decision matters more than the incorporation decision, and the reason profit you leave in the company is taxed once rather than twice.

The five minute check

1. Is your salary a set amount on a set day, or do you move money when it feels tight?
2. Does every transfer out of the company have a door attached, decided before it moved?
3. Is there a director’s loan sitting there that nobody has called a director’s loan?
4. If a second person went on the payroll above £5,000, would the £10,500 allowance more than pay for it?
5. Does your income cross £100,000, where the personal allowance taper makes every extra pound cost you 60p in effect?

Two or more bad answers there and the fix is an afternoon, not a project.

Watch the full breakdown

Sarah works through the same decision on camera, with the numbers on screen.

Getting this right, every year

Tax 4 Pros looks after limited company directors on a fixed monthly fee. Accounts and filings done properly, and the pay, structure and planning decisions looked at before the year end rather than after it. Every package and every price is published, so you can see what you would pay before you speak to anyone.

See the packages and prices, or book a fifteen minute call and we will tell you which one you need, including if that is the cheapest one.

Figures are current for the 2026/27 tax year at the date of publication. The Autumn Budget on 28 October 2026 may change several of them. This is information, not personal advice, and your own facts change the answer.

Written by Sarah Charlton, tax strategist and founder of Tax 4 Pros.