The Autumn Budget froze the personal allowance until 5 April 2031 at £12,570, as well as freezing the UK basic, higher and top rate bands.

The basic rate of tax on dividends increases to 10.75% in 2026/27 with the higher rate increasing to 35.75%, though the top rate remains at 39.35%.

The primary and secondary NIC thresholds are also frozen until 5 April 2031,

For employees the lower earnings limit is £6708 and this is the minimum you need to earn to be credited with NIC without actually paying NIC.

Employees NIC is payable on the earnings between £12,570 and £50,270 at 6%, then 2% on earnings above £50,270.

The employer’s NIC threshold is £5,000, with NIC payable at 15% above this.

In a company the optimum salary extraction strategy is generally to pay a salary of £12,570 and take out the rest as dividends. A salary higher than £12,570 will almost always make you worse off overall.

If you need to extract profits soon, consider extracting them before 6 April 2026 to save 2% tax, rather than after 5 April 2026, unless this would push the owner into a higher tax band.

Retaining profit in a company (and the consequent cash) can be realised on liquidation at CGT rates, i.e. 18% or 24% tax but you would need to factor in a liquidator’s costs unless the amount to be extracted is less than £25,000, when basically you can do it yourself.

Other Tax Efficient Ways of Extracting Profit

There are other tax efficient ways to take out profit such as:

1. Pay interest on a director’s loan balance – If company owes the director money, the director can charge up to a market rate of interest on the loan. This is a deductible expense for the company, saving tax at 19%, 25% or 26.5%. If a director is taking a £12570 salary and no other general income they will have a £5,000 starting rate band for interest (and possibly a £500 or £1,000 PSA), with an income tax rate of 0%. So the interest could be tax free.
2. Corporate pension contributions – Additional pension contributions is still very tax-efficient remuneration, being an exempt benefit for the director (up to the annual allowance available), as well as a deductible expense for the company. However, if the owner is not close to pension age, they may not want to use the profits in this way as the benefit will not feel tangible.
3. The company pays trivial value benefits tax free – Trivial benefits like going out for birthday or wedding anniversary meals, can be paid by the company using the trivial benefits exemption (up to £300 pa for directors and family of close companies). Alternatively, a birthday or Christmas present of up to £50 in Amazon or other vouchers would qualify for exemption, subject to the £300 rule.