If you're a company director wondering how much to pay yourself in 2026/27, here's what's changed and what hasn't. The headline this year: dividend tax rates have gone up by 2% across the board. Thresholds, allowances, and NI rates are otherwise unchanged. So the strategy stays the same — but the cost of getting it wrong is a little higher.

Here's a clear, no-jargon guide on the most tax-efficient way to split your salary and dividends this year.

STEP 1: START WITH THE RIGHT SALARY

Single-Director Companies (No Employment Allowance)

Recommended Salary: £12,570/year (£1,047.50/month) Employer NI Due: Yes – 15% on amounts above £5,000 = approx. £1,135 for the year Employee NI: None (threshold starts at £12,570) Why This Works: You still get full corporation tax relief, qualify for state pension, and it keeps things simple. Yes, you pay some employer NI, but it's outweighed by the tax savings.

Multi-Director or Multi-Employee Companies (Eligible for Employment Allowance)

Recommended Salary: £12,570/year Employer NI: Fully offset by the £10,500 Employment Allowance Why This Works: You get all the benefits of the higher salary without paying a penny in NI.

STEP 2: TOP UP WITH DIVIDENDS

Once you've set your salary, you can take the rest of your income through dividends. Here's how to structure it based on your personal goals:

OPTION 1: Pay No Tax at All

Salary: £12,570 Tax-Free Dividend Allowance: £500 Total Annual Income: £13,070 Monthly Drawings: £1,089.17 Tax to Pay: £0

Perfect for low-income years, testing a new venture, or building up reserves rather than extracting cash.

OPTION 2: Stay in the Basic Rate Tax Band

Salary: £12,570 Taxable Dividends: up to £37,200 (after the £500 allowance) Dividend Tax: 10.75% = £3,999/year Total Annual Income: £50,270 Monthly Drawings: £4,189.17 Tax to Pay: £333.25/month

This is the sweet spot for most business owners. Note that the basic rate dividend tax has risen from 8.75% to 10.75% this year — that's an extra £744 annually compared to last year at the same income level. Still far cheaper than higher rate territory.

OPTION 3: Maximise Income Up to £100,000

Salary: £12,570 Dividends: £87,430 Dividend Tax: £37,200 at 10.75% = £3,999 £49,230 at 35.75% = £17,605 Total Tax: £21,604 Total Income: £100,000 Monthly Drawings: £8,333 Tax to Pay: £1,800/month

You're into higher rate territory, but you keep your personal allowance — which you start to lose above £100,000. The higher rate dividend tax has risen from 33.75% to 35.75% this year. If you're regularly drawing at this level, pension contributions are worth a serious conversation.

WHAT'S CHANGED IN 2026/27

The core strategy hasn't changed, but dividend tax has gone up:

Basic rate dividend tax: 8.75% → 10.75% Higher rate dividend tax: 33.75% → 35.75% Additional rate dividend tax: 39.35% (unchanged)

Everything else — personal allowance (£12,570), basic rate band ceiling (£50,270), dividend allowance (£500), employer NI rate (15%), Employment Allowance (£10,500) — is the same as last year.

FINAL THOUGHTS

Whether you want to take home just enough to live tax-free, or you're pulling a six-figure income, the key is balancing your salary and dividends smartly. If you're a single-director company, bite the bullet on the employer NI and pay the £12,570 salary anyway — it still works out better in most cases.

If you've got a spouse or another employee in the business, make sure you're claiming the Employment Allowance. It's an easy win.

And if you're drawing anywhere near the basic rate ceiling, it's worth revisiting your numbers. Dividend tax is now more expensive than it was, and with thresholds frozen until 2031, more income is quietly falling into taxable bands every year.

Need help structuring this properly for your business? That's what we do. Drop us a message and we'll walk you through it.