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How to Pay Yourself as a Director in the 2025/26 Tax Year

  • Writer: Paul Edwards
    Paul Edwards
  • Apr 16
  • 2 min read

Smiling cartoon man in suit, floating money, green background. Text: How to Pay Yourself as a Director in the 2025/26 Tax Year. Logo: Strength in Numbers.
Because running a business is tough enough without tax headaches!

If you're a limited company director, one of the perks is having some flexibility in how you pay yourself. But with great flexibility comes...a few decisions to make.


Here's a no-nonsense guide to paying yourself tax-efficiently in the 2025/26 tax year.


1. Salary + Dividends = Smart Combo

Most directors take a mix of a small salary and dividends. Why? It helps you stay tax-efficient while keeping your National Insurance (NI) record ticking over.


2. What's the Optimal Salary in 2025/26?

This depends on whether your company is claiming the Employment Allowance (more on that in a sec). But here’s the gist:

  • If you ARE claiming Employment Allowance (e.g. you’ve got other employees):You can pay yourself £12,570 a year (£1,047.50/month) – this uses your personal allowance without triggering any income tax or employee NI.

  • If you’re NOT claiming Employment Allowance (e.g. you’re the only employee):A salary of £9,100 a year (£758.33/month) is ideal. It’s above the Lower Earnings Limit, so you’ll get NI credits for your state pension, but you won’t actually pay any NI.


3. Topping Up with Dividends

Once your salary is sorted, you can take the rest of your income as dividends (assuming your company has enough post-tax profits).

Here’s what the dividend tax rates look like for 2025/26:

  • £500 tax-free Dividend Allowance

  • 8.75% on dividends within the basic rate band

  • 33.75% for higher rate

  • 39.35% for additional rate

Important: Dividends must be paid from retained profits after corporation tax. And don’t forget to do the proper paperwork – board minutes and dividend vouchers.

4. Don’t Forget Your Tax Return

Your salary gets reported via PAYE, but dividends go on your personal Self Assessment tax return. You’ll need to keep track of what you’ve taken and set aside money to pay the tax on it.


5. A Few Extra Tips

  • Pension contributions made through the company can be very tax-efficient.

  • Avoid “director’s loans” unless you know what you’re doing – they can come with nasty tax consequences.

  • If you’re ever unsure, chat to us – getting it wrong can cost you.


Final Thoughts

Paying yourself as a director in 2025/26 doesn’t need to be complicated, but it’s always worth having a plan. The right mix of salary and dividends can save you tax and keep everything above board. If you're unsure what works best for you, we’re here to help.

Need help working it all out?

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