Can I pay myself entirely in dividends with no salary?

Technically yes, but it is rarely advisable. Without any salary, you miss out on the tax-free Personal Allowance, you do not build State Pension qualifying years, and it can create problems with mortgage applications. Most accountants recommend at least some salary.

What if my company profits are under £50,000?

If your profits fall within the small profits band (under £50,000), you pay Corporation Tax at 19% instead of 25%. This makes dividends slightly more attractive because less tax has been paid before you receive them. The optimal salary of £12,570 still applies in most cases.

Should my spouse be a shareholder?

If your spouse is a genuine shareholder and is involved in the business, paying them dividends can be a legitimate way to use their tax-free allowances and basic rate band. However, the arrangement needs to be genuine and properly documented. It is worth getting professional advice on this.

Is it worth making pension contributions from the company instead?

Often, yes. Employer pension contributions are Corporation Tax deductible, free of Employer and Employee NI, and not subject to dividend tax. For higher earners, this can be one of the most tax-efficient ways to extract profit. The annual allowance for pension contributions in 2026/27 is £60,000.

How often should I review my salary and dividends strategy?

At least once a year, ideally at the start of each tax year (April). If your circumstances change significantly during the year — a large contract, a new employee, a property purchase — it is worth reviewing mid-year too. This is exactly what our Tax MOT service is designed for.

Salary vs Dividends 2026/27: The Tax-Efficient Way to Pay Your...

Salary vs Dividends 2026/27: The Tax-Efficient Way to Pay Yourself

If you run a limited company, one of the most important financial decisions you make each year is how to pay yourself. Get the salary and dividends mix right and you could save thousands in tax. The 2026/27 tax year has brought significant changes — most notably a rise in dividend tax rates across the board to 10.75% (basic) and 35.75% (higher).

For business owners who want to take this further, our service for limited companies can help you put it into practice.

This guide covers how salary and dividends are taxed differently, the optimal salary level for 2026/27, worked examples for £50k, £80k and £100k profit, and the most common mistakes directors make.

If this overlaps with another part of your business, our Tax MOT is worth a look too.

Ready to take action? request a no-obligation strategy call.