Скачать или смотреть How to pay yourself from your limited company - optimal salary revealed

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DISCLAIMER: I am an accountant, but this is not financial advice.

How to pay yourself the most tax-efficient salary as a director of a Limited company in 2025/2026. Avoid paying yourself more than the personal allowance of £12,570 as this will attract employers national insurance at 15%, employees national insurance at 8% and income tax at 20%. This gives a marginal tax rate of 43%.

I recommend using a spreadsheet to plan your business and personal taxes.

Spreadsheets have advantages over websites including:-

Full control and customisation - Websites often restrict you to predefined assumptions or limited options.

Transparency of Calculations - Spreadsheets show exactly how all the numbers are calculated. No hidden formulas or black-box results — you can trace every result line by line. Great for peace of mind and learning about how taxes really work. My spreadsheet has no Macros, VBA or similar scripts.

Scenario Testing - Easily run what-if scenarios: “What if I make pension contributionsr?” “What if my business increases its profits?” You can also save different versions of the spreadsheet so you could have what you thought would happen each tax year and look back on the numbers.

One-Time Download, Lifetime Use - No need for logins, subscriptions. You can use it anytime, anywhere — and you own the file. Will the website you choose to host your data still exist in 2 years time? A spreadsheet will still be around.

Integration with Other Spreadsheets - You can link the spreadsheet with your budget, or payroll calculations — all in one workbook.

Dividends vs Salary in 2025/2026
A basic salary topped off with dividends is often the most tax-efficient way to pay yourself from a Ltd business. The basic salary takes full advantage of the tax-free personal allowance, and dividends have a lower tax rate than the combination of Income Tax and Employers & Employees National Insurance.

In some circumstances, a full PAYE salary may be more tax-efficient.

Income Tax Rates and Thresholds for 2025/2026:
• Personal allowance = £12,570 (0%)
• Basic rate = £12,571 to £50,270 (20%)
• Higher rate = £50,271 to £125,140 (40%)
• Additional rate = £125,140+ (45%)

Note: For every £2 you earn over £100,000 you lose £1 of personal allowance (marginal rate 60% - see this video HMRC secret 60% uk income tax rate - does it impact you?)

Dividend Tax Rates and Thresholds for 2025/2026:
• Basic rate = £12,571 to £50,270 (8.75%)
• Higher rate = £50,271 to £125,140 (33.75%)
• Additional rate = £125,140+ (39.35%)

Dividends Explained
• Dividends are payable to shareholders from current year profits or retained profits from previous years
• Dividend tax is paid via self-assessment
• The tax-free dividend allowance for 2025/2026 is £500

National Insurance Rates and Thresholds for 2025/2026:
• Lower Earnings Limit (National Insurance Threshold) - £6,500 per year
• Primary Threshold (Employees) - £12,570 per year to align with personal allowance
• Employees Rate: 8% up to £50,270 and 2% over £50,270
• Secondary Threshold (Employers) - £5,000 per year
• Employers NI = 15% above the secondary threshold (no reduction above £50,270)

Corporation tax rates and thresholds for 2025/2026:
• Less than £50,000 (Small Profits Rate) = 19%
• £50,001 to £250,000 = taper between 19% and 25%
• £250,000+ = 25%

Most Tax Efficient Director’s Salary 2025/2026:
• Recommended Salary: £12,570 Per Year (Above this use dividends to avoid double NI & income tax)
• Uses full personal allowance (no income tax due)
• Above the LEL NI threshold to qualify for state pension & below Primary NI threshold (no employees NI due)
• Above Secondary NI threshold so employers NI becomes due from £5,000 to £12,570 (£7,570 at 15% = £1,135.50)
• (Last year £9,100 to £12,570 (£3,470 at 13.8% = £478, this is an increase of £657.50 in 2025/26!)
• But it’s still more tax efficient than paying a lower salary (15% NI vs 19% Corporation Tax)
• NI is an allowable expense deductible from corporation tax at a minimum of 19%: £1,135.50 at 19% = £215.75 corporation tax saving