If you run a limited company in Slough, deciding how to pay yourself — salary, dividends, or a mix of both — is one of the few financial decisions you control completely. Get it right and you keep thousands more of your own money each year. But the rules changed on 6 April 2026, and the approach that worked for the past few years now leaves money on the table if you don’t adjust it.
What Changed on 6 April 2026
Dividend tax rates increased by 2 percentage points across the board. Here’s the 2026/27 picture in full:
| Item | 2026/27 Figure |
|---|---|
| Personal Allowance | £12,570 |
| Dividend Allowance | £500 |
| Dividend tax — basic rate | 10.75% |
| Dividend tax — higher rate | 35.75% |
| Dividend tax — additional rate | 39.35% |
| Basic rate threshold | £50,270 |
| Employer National Insurance | 15% (above £5,000 secondary threshold) |
| Employment Allowance | £10,500 (not available to single-director companies with no other employees) |
The dividend allowance has already fallen sharply in recent years — from £2,000 down to £500 — so most dividend income above a fairly modest level is now taxable. Combined with April’s rate rise, a director extracting £50,000 in dividends this year pays roughly £1,000 more in tax than they would have under last year’s rates, purely from the rate change itself.
Why the Salary + Dividends Approach Still Works — With a Smaller Gap
For most one-director companies, the long-standing rule of thumb still points the same direction: a modest salary up to the personal allowance, topped up with dividends from remaining profit. The reasoning hasn’t changed —
- Salary is a deductible business expense. It reduces your company’s Corporation Tax bill.
- Salary at the right level protects your State Pension record by securing a qualifying year, even without paying employee National Insurance.
- Dividends carry no National Insurance at all, on either side, making them more efficient than salary once you’re above the personal allowance.
What’s changed is how much the strategy actually saves you — the gap between “salary + dividends” and “salary only” has narrowed because dividend tax itself is now more expensive.
The Optimal Salary for 2026/27
For the vast majority of UK limited company directors, £12,570 a year (£1,047.50 a month) remains the optimal salary level — set to exactly match the Personal Allowance.
At this level:
- No employee Income Tax is due (it’s fully covered by the Personal Allowance)
- No employee National Insurance is due
- Employer NI does apply above the £5,000 secondary threshold, but for single-director companies without Employment Allowance, this cost is still comfortably outweighed by the Corporation Tax relief the company claims on the salary itself
If your company has other employees and qualifies for the £10,500 Employment Allowance, the maths shift further in favour of a slightly higher salary — worth reviewing with your accountant rather than assuming last year’s figure still applies.
Worked Example: £80,000 Company Profit Before Salary
Take a Slough-based contractor operating through a limited company, with £80,000 of profit before any salary is paid:
- Salary of £12,570 is paid and deducted as a business expense, reducing taxable company profit to £67,430.
- Corporation Tax (at the small profits rate for most owner-managed companies) applies to that reduced figure.
- The remaining post-tax profit is available for dividends.
- The first £500 of dividends is tax-free under the dividend allowance.
- The next portion of dividends — up to the basic rate threshold — is taxed at 10.75%.
- Any dividends taken above the higher rate threshold (£50,270 combined income) are taxed at 35.75%.
This is a simplified illustration — your actual figures depend on your specific profit level, other income sources, pension contributions, and whether your company can claim Employment Allowance. But the shape of the calculation holds for most single-director companies in this profit range.
Common Mistakes We See From Slough Directors
Still running on 2023 or 2024 assumptions. The dividend allowance alone has been cut four-fold in a few years, and the April 2026 rate rise is the latest in a series of changes. A split that was optimal two years ago is very likely costing you money now.
Ignoring the higher rate threshold entirely. Dividend tax jumps from 10.75% to 35.75% the moment your combined income crosses £50,270 — a much bigger step than many directors expect. If you’re close to that line, timing dividend payments across tax years can sometimes help.
Forgetting pension contributions as an alternative to a large dividend. The 2026/27 annual pension allowance is £60,000, and unused allowance from the previous three tax years can often be carried forward. For a particularly profitable year, an employer pension contribution can sometimes be more tax-efficient than simply extracting more via dividends — and it comes straight off company profit before Corporation Tax.
Taking dividends without checking distributable profit. Dividends must legally come from retained, post-tax profit — not simply whatever is sitting in the company bank account. Paying an “illegal dividend” can create personal liability issues down the line, which is a bigger problem than a slightly suboptimal tax split.
Why a Local, Slough-Based Accountant Makes This Easier
Slough’s contractor and small business community — particularly those working the M4 corridor into Heathrow, or running trades and consultancy businesses from the Trading Estate — often has income that shifts year to year: a strong contract one year, quieter periods the next. A fixed, once-a-year salary/dividend decision doesn’t always fit that reality.
Reviewing your split isn’t a one-off exercise. Profit levels change, tax rates change (as they just did in April), and your personal circumstances — other income, pension planning, mortgage applications — all affect what the “right” split actually is for you this year, not last year.
How Direct Assist Accountants Can Help
We work with LTD company directors and contractors across Slough to review salary and dividend strategy against the current tax year’s rates — not last year’s. If you haven’t reviewed your split since before April 2026, there’s a good chance you’re either paying more tax than necessary or missing a more efficient structure for your specific situation.
Our LTD Companies and Contractors services already include this kind of proactive tax planning as standard — it’s not a separate add-on. If you’d like a personalised review of your salary and dividend structure for 2026/27, get in touch for a free consultation.
This article reflects confirmed UK tax rates and allowances for the 2026/27 tax year. Figures and thresholds can change; for advice specific to your company and personal circumstances, speak to a qualified accountant.