For 2025/26, what is the best salary and dividend combination to take if:
You’re a sole director/shareholder
Your only income is from your limited company
You’re not of pensionable age
Please note:
The tax listed below is payable personally (not from your company) by 31 January following the end of the 5 April tax year (e.g. I receive two tranches of dividends on 31 October 2025 and 31 March 2026, I’ll have until 31 January 2027 to pay the personal tax on these).
These figures only show your personal tax - this doesn’t take into consideration corporation tax payable by your company which will be due in addition to the personal tax payable.
The figures below are cumulative (e.g. the 8.75% dividend rate assumes you’ve already used up your tax free salary & dividend rates). See the examples at the bottom of this page for clarification.
Salary (Tax Free)
Year: £12,570
Month: £1,048
Personal Tax: Nil
Dividends (Tax Free)
Year: £500 (dividend allowance)
Month: £42
Personal Tax: Nil
Dividends (8.75%)
Year: £37,200 (£37,700 basic rate band - £500 dividend allowance)
Month: £3,100
Personal Tax - Year: £3,255 (£37,200 @ 8.75% dividend tax)
Personal Tax - Month: £271 (£3,100 @ 8.75% dividend tax)
Dividends (33.75%)
Year: £49,730 (£100,000 personal allowance threshold - £50,270 basic rate band)
Month: £4,144
Year Tax: £16,783 (£49,730 @ 33.75% dividend tax)
Month Tax: £1,399 (£4,144 @ 33.75% dividend tax)
General Advice
If you earn over £100,000, please speak to us.
If you don’t earn over £100,000, the general advice we give people is to pay themselves up to £50,270 per year if you can (see example 1 below). Anything above that, we’d suggest avoiding the 33.75% personal dividend tax rate by:
Leaving money in the business and paying out dividends in a different tax year
Paying into a pension which would also reduce your corporation tax bill. We recommend arranging a meeting with a financial advisor to discuss your options: www.millwardmay.co.uk/independent-financial-advisor
Example 1
How much am I personally taxed on £50,270 (i.e. £12,570 salary, £37,700 dividend)?
£12,570 salary @ 0%
£500 dividend @ 0%
£37,200 dividend @ 8.75% = £3,255
I therefore take out £50,270 from the business and pay £3,255 in personal dividend tax.
Example 2
How much am I taxed on £100,000 (i.e. £12,570 salary, £87,430 dividend)?
£12,570 salary @ 0%
£500 dividend @ 0%
£37,200 dividend @ 8.75% = £3,255
£49,730 dividend @ 33.75% = £16,784
I therefore take out £100,000 from the business and pay £20,039 (£3,255 + £16,784) in personal dividend tax.