How to pay yourself from a limited company: 2026/27 guide

Salary

Salary is a company expense, so it reduces corporation tax. A salary of £12,570 uses your personal allowance and counts towards your State Pension. Employer National Insurance is 15% on pay above £5,000, and a single-director company cannot claim the Employment Allowance.

Dividends

Dividends can only be paid from profits after corporation tax. For 2026/27 you get a £500 allowance, then pay 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% above £125,140. For example, with a £12,570 salary and £40,000 of dividends, dividend tax is about £4,821. See our dividend tax guide.

The best mix of salary and dividends

The best mix depends on your profit, other income, student loan and goals. For example, a director with £80,000 of company profit before salary and corporation tax takes home about £55,765 on a £12,570 salary plus dividends in our comparison. Try your own numbers in the salary and dividend calculator.

Other ways to take money out

• Expenses: reimburse genuine business costs. See allowable limited company expenses.
• Pension contributions: employer contributions are deductible for corporation tax.
• Director loans: allowed, but they have tax consequences.

Director loans and section 455 tax

If your director loan account is overdrawn 9 months and 1 day after the company year end, the company pays section 455 tax. The rate is 35.75% on loans made on or after 6 April 2026 and 33.75% on earlier loans. It is refundable once the loan is repaid. Read our director loan account guide.

Worked example: £80,000 of company profit

A single-director company has £80,000 of profit before the director’s salary and corporation tax. We compared three salary levels, assuming all profit is paid out and no Employment Allowance.

In this example a £12,570 salary gives the highest take-home, but the differences are small. Your own answer will vary with other income, student loans and whether you leave profit in the company.

Leaving profit in the company

You do not have to pay out every pound. Profit left in the company is taxed only at corporation tax (19% to 25%), and you can pay it out in a later year, for example when your other income is lower. Retaining profit is the main way a limited company can still beat sole trader tax today.

Employer pension contributions

A company can pay into your personal pension. These contributions are usually deductible for corporation tax and are not taxed on you as income, subject to the annual allowance. They can be one of the most tax-efficient ways of taking money out.

Student loans and other income

If you have a student loan, salary and dividends both count towards repayments, so factor that in. If you have rental income or a second job, your dividend tax band changes. A planning session considers all of this together.

For London directors

London directors, from tech contractors in Tower Hamlets to consultants in Richmond, benefit from planning before the tax year ends on 5 April. Our limited company accountants by borough help with accounts, tax and pay planning, online.