If you run a UK limited company, paying yourself isn’t just “take some money out when you need it”. The way you draw income can make a real difference to your take-home pay, and it can also save you a lot of stress when Self Assessment season rolls around. Most directors end up using a mix of salary and dividends, and that’s still the usual starting point in 2026. The reason it’s worth revisiting this year is simple: dividends are being taxed more heavily from 6 April 2026, and employer National Insurance costs are a bigger factor than many business owners expect. So if you’ve been running the same setup for a while, this is the year to double-check it still makes sense. This guide explains how to think about a tax efficient salary and dividends 2026 UK plan in plain English, without the fluff. Salary and dividends: what you’re actually choosing Let’s keep it straightforward. A salary is paid through payroll. Your company runs PAYE, reports it to HMRC, and it’s treated like normal employment income. A big plus is that salary is a company expense, so it reduces your taxable profit, which can reduce corporation tax. Dividends are paid out of profits after corporation tax. They’re not a company expense. They’re basically the company sharing profits with you as a shareholder. You then pay dividend tax personally on dividends above the dividend allowance, depending on your tax band. This is why directors usually take both. Salary gives structure and a steady baseline. Dividends give flexibility and can be more tax-efficient than taking everything through payroll. What changes in 2026: dividend tax is higher from 6 April 2026 This is the big one for 2026 planning. From 6 April 2026 (the start of the 2026/27 tax year), dividend tax rates increase by 2 percentage points for the ordinary and upper dividend rates. So, in simple terms: Ordinary dividend rate goes from 8.75% to 10.75% Upper dividend rate goes from 33.75% to 35.75% Additional dividend rate stays at 39.35% Dividends can still be a smart part of the plan. They’re just not as “cheap” as they were, especially if you’re in the basic or higher-rate band. Step 1: decide your director salary properly When people talk about optimal director salary 2026, what they usually mean is, “How do I take a salary that makes sense without paying loads of unnecessary National Insurance?” A salary can be useful for a few reasons: You get a reliable monthly income It can help with mortgage applications It keeps payroll neat and compliant It can support a qualifying year for certain state benefits (depending on your situation) But salary can also trigger National Insurance costs for you and for the company. For 2025/26, the standard Personal Allowance is £12,570 for most people. Employer National Insurance is charged at 15% above the employer threshold, and that employer threshold is £5,000 per year. That’s why many directors don’t automatically set salary at £12,570. In some setups, pushing salary higher creates an employer National Insurance bill that outweighs the benefit. The “right” salary depends on your situation: whether you have employees, whether you can use Employment Allowance, and what your overall income looks like. The key is not the exact figure. It’s making the decision on purpose, rather than guessing. Step 2: take dividends with a plan, not on a whim Dividends often feel easier because you can take them whenever the company has cash. But tax doesn’t care when you feel like taking money out. Tax cares where your income lands across the tax bands. Here’s the important bit: dividends sit on top of your other income. So your salary and any other income use up the lower tax bands first, and then your dividends are taxed based on whatever band they fall into. The dividend allowance gives you a small slice taxed at 0%, but it doesn’t make dividends “tax-free”, and it doesn’t expand your bands. The real value of dividends is how they’re taxed compared to salary and National Insurance. This is where limited company director pay UK planning becomes less about “dividends are better” and more about “how much dividend can I take before I drift into a higher band?” Step 3: watch the £100,000 to £125,140 trap This catches a lot of directors, especially in good years. Once your adjusted net income goes above £100,000, you start losing your Personal Allowance. You lose £1 of allowance for every £2 above £100,000, and it disappears completely at £125,140. So if you’re taking extra dividends and you push yourself into that range, your tax bill can jump more than you expect. That’s why the personal allowance taper £100,000 needs to be on your radar. It’s not about being scared of success. It’s about not sleepwalking into a painful tax band because you took dividends without checking where your total income was heading. If you’re close to that level, planning options exist, but you want them done properly and in line with your wider goals. Step 4: Make sure dividends are backed by profits This sounds obvious, but it’s one of the most common issues we see. Dividends must be paid out of distributable profits. Cash in the bank is not the same thing as profit. If dividends are taken without profits, it can create problems with your accounts and lead to messy fixes later. A simple way to stay on top of it is to review your numbers quarterly. It keeps you confident that what you’re taking out is supported by the accounts, and it reduces the chance of nasty surprises. Step 5: Don’t ignore corporation tax in the full picture It’s easy to focus only on your personal tax, but remember: dividends come out after corporation tax. Corporation tax is still tiered: 19% on profits up to £50,000 25% on profits over £250,000 Marginal relief between £50,000 and £250,000 So the “true cost” of a dividend includes corporation tax first, then dividend tax. Salary reduces corporation tax but may increase National Insurance. This is exactly why a blended approach is often best. A practical structure that feels sensible in 2026 Rather than hunting for one “perfect” number, think in layers. First, choose a sensible salary that fits your life and keeps payroll tidy. Don’t set it too high just to use the Personal Allowance if it triggers employer National Insurance costs you could avoid. Second, use dividends to top up your income to your target level, but keep a close eye on what band you’re moving into, especially with the higher dividend tax rates from 6 April 2026. Third, if your profits are strong, remember you don’t have to extract everything immediately. Sometimes leaving money in the company for working capital, growth, or better timing later is the most tax-efficient move of all. Timing matters around April 2026 Dividends are taxed in the tax year they’re paid. So a dividend paid before 6 April 2026 is taxed under 2025/26 rates. A dividend paid on or after 6 April 2026 is taxed under the higher 2026/27 dividend rates for ordinary and upper-rate dividends. That doesn’t mean you should rush and take money out without thinking. It simply means timing is one of the levers you can consider as part of an overall plan. Common mistakes to avoid Taking dividends without checking distributable profits Setting salary too high without factoring employer National Insurance Letting dividends push you into higher-rate tax without noticing Accidentally entering the £100k taper band Treating pay planning as something you only think about once a year F AQs What’s the most tax-efficient way to pay myself as a UK director in 2026? For many directors, a mix of salary and dividends still works well. Salary gives structure and can reduce corporation tax, while dividends can reduce National Insurance exposure. The best balance depends on profits, other income, and whether higher salary creates avoidable employer National Insurance costs. Are dividends still worth taking after 6 April 2026? Often yes, but they’re slightly less efficient than before because ordinary and upper dividend rates increase by 2 percentage points from 6 April 2026. If you take meaningful dividends each year, it’s worth reviewing your approach rather than relying on old assumptions. Should I just take salary up to the Personal Allowance? Not always. A higher salary can reduce corporation tax, but it can also trigger employer National Insurance costs. The most sensible salary point depends on your company setup, whether you have employees, and whether allowances apply. What is the dividend allowance and does it mean dividends are tax-free? The dividend allowance taxes the first slice of dividends at 0%, but dividends above that are still taxed based on your tax band. It helps a bit, but dividends are mainly attractive because of how they’re taxed compared with salary plus National Insurance. Why is the £100,000 income level a big deal? Because once adjusted net income goes above £100,000, your Personal Allowance starts to reduce, and it can create a surprisingly high effective tax rate. If your salary and dividends push you into that zone, proper planning can prevent an unnecessary jump in tax. Can I take dividends whenever the company has cash? Only if the company has enough distributable profits and the dividend is properly declared. Cash in the bank doesn’t automatically mean you can take a dividend. Final thought A tax-efficient pay strategy in 2026 isn’t about copying what someone else does. It’s about setting a sensible salary, using dividends deliberately, and keeping an eye on the tax bands that create expensive surprises.

Let’s face it; most creatives did not start their business to build spreadsheets. You started it to design, to express, to build something beautiful. But as your business grows, a few key numbers (that are not even in your spreadsheet) start to define your profit, peace of mind, and long-term success. Here are 5 numbers every creative founder should know; no accounting jargon, no spreadsheets required. 1. Your Minimum Monthly Amount to Breathe Not to break even. Not to “survive.” But to breathe; comfortably. This is the real number that covers: Your personal bills Your must-have business costs The cushion you need to sleep at night Why it matters: This becomes your pricing floor. If your business is not meeting this, you are undercharging or overstretched. 2. Your Time Cost per Project Ever thought, “That project took way longer than I planned”? You are not alone. Even without spreadsheets, just estimating how long you spend on: Discovery Design/revisions Client hand-holding Admin ...will show you if you’re making £15/hour or £150/hour. Why it matters: It is the first step to pricing profitably and planning sustainably. 3. Your “No” Number What is the income level where you can start saying “no” to bad-fit clients? Every creative business needs a “no” number. It is the point where you no longer need to say yes to: Undervaluing work Scope creep Clients who drain your energy Why it matters: Clarity here builds confidence. Confidence builds boundaries. Boundaries build profit. 4. Your Dream Project Number What does your dream client/project/retainer need to pay you to be worth it? Get specific: How many hours would it take? What would you need to hire or outsource? What price would make you feel proud? Why it matters: This becomes your north star when pitching, positioning, or saying yes. 5. Your WTF Number The number in your bank account where you start panicking. We all have one; let’s stop pretending we don’t. Knowing your personal “uh-oh” number allows you to: Plan in advance Create a cash buffer Avoid making panic-based decisions Why it matters: You cannot be creative when you are constantly in survival mode. 💬 Final Thoughts None of these numbers live in Xero or QuickBooks. They live in your head, your gut, your bank account, your boundaries. But when you start tracking them; even roughly, you build a business that feels clearer, calmer, and more in your control. Need help figuring them out? This is exactly what I help creatives and agencies do; without jargon or overwhelm. Get in touch here and let’s make your numbers make sense.

Struggling to price your creative services? Here’s what every agency needs to know about setting rates, making profit, and pricing with confidence .

Let’s get one thing clear: If you’re a creative founder, a designer, a brand strategist, a digital storyteller; you are not bad with money. You’ve built something out of nothing. You’ve turned talent into a business. You’ve handled clients, deadlines, content, ideas, staff, suppliers and somehow kept it all afloat. That’s not “bad with money.” That’s resourceful. That’s resilient. That’s brilliant. But the truth is the financial world wasn’t built for people like you. The Finance World Talks in Spreadsheets. You Think in Stories, Colours and Strategy. Most accountants you meet will talk at you in jargon. They’ll send you tax returns and PDFs and expect you to just “get it.” But they don’t sit down and show you how to build a business that pays you properly. They don’t ask how much you want to earn. They don’t check how your cash flow feels when a client pays 30 days late. They assume you’re like every other business. But you’re not. You’re a creative. That changes everything. You Don’t Need a Lecture. You Need Someone Who Gets It. The feast-and-famine cycle is real. Some months you’re up, some months you’re coasting on fumes. You’re spinning so many plates; client work, social content, emails, proposals and when it comes to finances, you think: “I’ll look at that tomorrow.” But then tomorrow becomes next month. And suddenly it feels too messy. So you avoid it. And feel guilty. And assume it’s just you. But it’s not just you. This is happening to so many creatives. And I want you to know there’s nothing wrong with that. The Missing Piece? Financial Clarity That Feels Like It’s Made for You. Imagine if your accountant didn’t just talk tax. Imagine if they helped you: ✅ Understand where your money’s actually going ✅ Plan for quieter seasons ✅ Set prices that feel fair and profitable ✅ Build a cash flow you can actually breathe in ✅ And feel in control not confused, overwhelmed, or behind This isn’t about turning you into a finance expert. It’s about giving you the tools to run your business with clarity and calm so you can do more of what you love, without burning out. You’re the Creative Genius. Let Me Handle the Numbers. I work with creative founders, boutique agency owners and digital service businesses not just as an accountant, but as a partner in your business journey. I’ll explain the numbers in plain English, help you make strategic decisions, and be the quiet financial brain in the background so you can stay in your zone of genius. Ready to finally feel good about your finances? Let’s have a friendly, no-pressure chat just click below to book a free 20-minute intro call. 👉 https://calendly.com/accountingassist/multi 👉 Or connect with me on LinkedIn where I share financial insights for creative founders regularly

Businesses that deferred VAT due from 20 March to 30 June 2020 and still have payments to make now have option to opt into the VAT deferral new payment scheme to pay their deferred VAT in 11 interest free monthly installments. The businesses can either Pay the deferred VAT in full, on or before 31 March 2021 or Join the VAT deferral new payment scheme – the online service is open between 23 February and 21 June 2021 Contact HMRC on Telephone: 0800 024 1222 by 30 June if they need extra help to pay Failure to do one of above will result in interest or penalty. The businesses on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme,will be invited to join the new payment scheme later in March 2021. The new scheme lets you: Pay your deferred VAT in equal instalments, interest free Choose the number of instalments, from 2 to 11 (depending on when you join) To use the online service, you must: Join the scheme yourself, your agent cannot do this for you Still have deferred VAT to pay Be up to date with your VAT returns Join by 21 June 2021 Pay the first instalment when you join Pay your instalments by Direct Debit (if want to use the scheme but cannot pay by Direct Debit, there’s an alternative entry route for you) If you join the scheme, you can still have a Time to Pay arrangement for other HMRC debts and outstanding tax The month you decide to join the scheme will determine the maximum number of instalments that are available to you. If you join the scheme in March, you’ll be able to pay your deferred VAT in 11 instalments or fewer. The table below sets out the monthly joining deadlines (to allow for Direct Debit processing) and the corresponding number of maximum instalments (including the first payment): Join by Number of instalments available 19 March 2021 11 21 April 2021 10 19 May 2021 9 21 June 2021 8

Deferred tax can relate to a positive or negative asset and the entry can be found on a balance sheet. This entry refers to the tax that has been overpaid or is owed due to a few differences. The positive entry is considered asset and negative entry is liability. Deferred Tax Asset Over payment or advance payment of tax by a business in a period is marked on the balance sheet as a deferred tax asset. It shows that the company is entitled to a small tax break the next time they file their taxes. Paying in advance, creating tax assets helps a business that is looking to decrease the tax liability in the next period. Deferred Tax Liability On the other hand, Deferred tax liability occurs when a company’s estimated tax using income for a specific accounting period’s accounts is different to the taxable amount that is found on their tax return. In this case, a liability is entered on the balance sheet. This is where the amount that has been entered onto the balance sheet has to be paid in the future. Does it affect Cash flow? Deferred tax assets and liabilities can have a strong impact on cash flow. An increase in deferred tax liability or decrease in deferred tax assets is a source of cash. Likewise, a decrease in liability or an increase in deferred asset is a use of cash. Analyzing the change in deferred tax balances is important as it helps to understand which direction are the balances moving towards i.e. will the balances continue to grow in same direction or is there a likelihood of reversal in near future? Temporary Differences An important concept to be kept in mind in relation to deferred tax is temporary taxable differences. This occurs when a business has an asset with a liability value that does not match with the current taxable value of the asset. This happens when the accounting approach and tax laws differ in how the depreciation of an asset is handled. These temporary differences can impact on a financial account because they mean that income and expenses appear within one accounting period, but the tax is payable in a different accounting period. A taxable difference can be either taxable or deductible. Example to understand the deferred corporation tax: To understand the concept of deferred tax let’s consider an example. Your business generates £10,000 in profit per year. In the first year you purchase a laptop that costs £1,000 and the life of your laptop is 4 years, that is, after 4 years your laptop will be worthless. Hence, the depreciation for laptop would be calculated to be £250 per year. Now, let’s consider your profits to stay at exactly £10,000 for all the following years (5 years). Now, according to capital allowance rules, you can deduct the full £1,000 from your profit of £10,000 taxable profits in year one and hence will pay tax on a profit of £9,000 (rather being on the accounting treatment in year one to five and paying tax on a profit of £10,000-£250 = £9,750). Overall, the same amount is claimed and across the five years the same tax will be paid.

Insolvency is the state of being unable to pay the money owed, on time, when a business doesn’t have sufficient funds to meet its financial obligations it can become insolvent. A business having liabilities greater than its assets can be facing risk of insolvency. The insolvency of a business is a stressful situation for the company’s directors and staff members. There are two types of insolvencies; cash-flow insolvency and balance-sheet insolvency. Cash-flow insolvency is when a company has enough assets to pay the owed money, but it does not have the appropriate form of liquid payment e.g. cash. Balance-sheet insolvency, on the other hand, is when a company does not have enough assets to pay all of its debts. Consequences of Insolvency For Limited Companies For limited companies or limited liability partnerships known as “LLP’s”, the consequences of insolvency will mean that the business will go into liquidation and stop trading or go into administration and be sold. For Sole Traders For sole traders or partnerships, the business owners are liable for the debts and their personal assets are at risk of being sold to repay their debts. In some cases, for bankrupted business owners, there is a possibility to face BRO’s which are Bankruptcy Restriction Orders. This happens if the business owners have misbehaved in their business running history and is investigated and taken in action by Insolvency Service. Steps that can be taken to avoid insolvency For the business directors it is better to realize and identify the insolvency situation as soon as possible. Soft consequences and hard consequences both are of the same seriousness for both directors and the company’s viability. Here are some suggestions which, in our opinion, may be helpful for you to avoid this stress. First of all, you should identify the problem as soon as possible, so that further actions can be taken. This could be made possible only by knowing the symptoms of insolvency and having an eye on such symptoms Keep an eye on your cash flows , keeping on top of cash flow forecasting and budgeting on regular basis At the very early stage, arrange a conversation with the relevant creditors, whom you owe debts Try to get an extension in the debt repayment agreements. You can also alter this agreement after having a conversation with the creditor. These steps may give your business a space to get settled and stable financially In such a state, do not allow the company to incur further debt and do not continue to trade You can bounce back your business by seeking immediate help from a licensed insolvency practitioner. This will help you give many solutions and finance options for the recovery of your business which would be appropriate and available according to the situation. This will also give suggestions about how to increase your cash flow which will in return increase your assets and stability of the business Need help with reviewing your cash flow or budgeting? G et in touch with us for a no obligation assessment call.

UK Government Announces an Offer of 100% Guarantees on “Bounce Back Loans” The Chancellor Rishi Sunak, on Monday 27th April, has announced an offer of 100 per cent guarantees on “bounce back loans” of up to £50,000 for the smallest businesses affected by the coronavirus outbreak. “This is addition to business grants, tax deferrals, and the job retention scheme, which are already helping to support hundreds of thousands of small businesses.” This new micro-loan scheme is designed to help small businesses struggling to access credit during the current lockdown. The scheme would be providing a simple, quick and easy solution for those who are in need of smaller loans. These loans would cover 25% of a business’s turnover up to £50,000 Government is guaranteeing 100% of the loan which will be interest free for first 12 months The scheme allows businesses to borrow between £2,000 and £50,000 The scheme has been designed to ensure that small firms who need vital cash injections to keep operating can get finance in a matter of days The loans will be available from 9am 4th May and payments would be made within 24 hours of approval, with “no complex eligibility criteria” Applicants will not face a viability test but some fraud checks will have to be completed Small companies will be able to apply through an online

In this age of advanced technology and in an era of commotion, it’s everyone’s top most priority to use the most developed tools and technological facilities. It is important for businesses is to keep proper and secure records of all accounting data and information which can be achieved by the help of a software which is reliable, up to date, time saving and can prevent any trouble in the future. Cloud Accounting Software can solve all of troubles and complications coming in the way of keeping a smooth and easily accessible record of accounting data. This software is hosted on a remote server. This uses internet to access the accounting records and information. Hence in cloud accounting software you don’t need to store your data in your computer i.e. your computer’s hard drive. Also, this is not based on your local server. The data which is stored in the cloud can be easily accessed as and when required by signing in using your login and password. Your accounting data this way stays safe, secure and private. In simple terms it can be called online accounting. Key accounting features of cloud accounting software  Easy management of intercompany transactions  Easy creation of management reports in Excel  Smart search, filters and drill-down features to slice and dice data  Submission of tax returns digitally  Easy accessibility to Microsoft Outlook  Manage account records with an audit trail  Multi-currency accounting and automated rate conversion  Multi-dimensional ledgers Cloud accounting software versus traditional accounting software Here is a comparison between cloud accounting software and traditional software, through this would easily be recognized the benefits and advantages of cloud accounting software • Whilst using traditional software, you need a proper working place with a complete set up of computer and all the required gadgets. Also, for this purpose you need to stay at your office throughout the working hours. Cloud accounting software, however, doesn’t require this, you can work outside your office or wherever you are sitting as all records can be accessed remotely. • This is quite an obvious fact that doing any type of work manually requires more time, efforts and energy. In traditional software we have to do most of our work manually which wastes times as well as working potential. Cloud accounting software on the other hand gains information online as in the cloud accounting software you get access to HM revenue and Customs service, internet banking and any other relating area. • Whenever working through a computer, there is always a possibility of your computer or any other tool you are using, to get damaged, lost or even stole. While using cloud accounting software, you can do your accounting work confidently without having any fear that your device would get damaged or lost. In case, anything like this happens to your computer or device you are using, you don’t need to be stressed because all your accounting data and information is safe and secure in cloud. • Cloud accounting software doesn’t require purchasing any type of servers, tools or gadgets which may be your need while using traditional software because cloud accounting system use internet for the working. This in return saves money invested on these tools as well. • While using cloud accounting software many users can enter the system at the same time and work together regardless of their sitting areas. Traditional software, on the other hand, might not provide this type of facility and hence a limited number of people and users can work at a time. • Transfer of information is also very easy while using cloud accounting software. Traditional software uses hard disc or emails, which sometimes make your work complicated. Using cloud accounting software, you can also get rid of such complications. If you are looking to be setup on cloud accounting software or need more information why not have a no-obligation chat with us with us, we specialize in cloud accounting software such as QuickBooks, Xero, Sage and Kashflow.