Running your income through a limited company gives you choices a sole trader never gets: how much to pay yourself, in what form, and when.
Directors who plan those choices before the year end routinely keep thousands more than directors who leave everything to the final week of March. Here are fifteen strategies worth reviewing for 2026.
1. Get the Salary Level Right
For most directors, a salary around the £12,570 personal allowance remains the anchor. It secures a qualifying year for your State Pension, counts as a company expense, and attracts little or no personal tax. Pay yourself much more through payroll and employer National Insurance starts eating the advantage.
2. Top Up With Dividends, Deliberately
Dividends carry no National Insurance and lower tax rates than salary, but the tax-free allowance is now just £500, so sequencing matters. How the bands and rates stack up is covered in our guide to UK dividend tax in 2026. The short version: fill your basic-rate band before the tax year closes, and don't declare dividends the company's profits can't cover.
3. Use Both Spouses' Allowances
If your spouse or partner genuinely participates in the business, a shareholding in their name means two personal allowances, two dividend allowances and two basic-rate bands. Set the share structure up properly from the start; HMRC looks closely at arrangements bolted together the week before a big dividend.
4. Make Employer Pension Contributions
The single biggest lever most directors ignore. Employer contributions are a company expense, free of both employer and employee National Insurance, and grow tax-free. The annual allowance is £60,000, with unused allowance from the previous three years available through carry forward.
5. Time Income Around the Tax Year
A dividend declared on 5 April lands in this tax year; one declared on 6 April lands in the next. If this year's income is already brushing the higher-rate threshold or the £100,000 personal allowance taper, deferring a few days can change the rate you pay on the whole slice.
6. Claim Every Legitimate Company Expense
Phone contracts in the company name, professional subscriptions, equipment, software, business travel. Directors often absorb these personally out of habit, which means paying for them from taxed income. Route them through the company and they come out of pre-tax profit instead.
7. Use the £50 Trivial Benefits Rule
The company can give you benefits of up to £50 a time, capped at £300 a year for directors, with no tax on either side. Six £50 gift cards a year is small money, but it's free small money.
8. Don't Skip the Annual Event Exemption
Up to £150 per head per year for staff events is deductible and tax-free, and a director-shareholder plus partner counts. A two-person company Christmas dinner is a legitimate claim, not a fiddle.
9. Charge the Company for Home Working
The flat £6 a week costs nothing to administer. A formal licence agreement charging the company a market rent for your home office can claim more, but the rent becomes personal income, so run the numbers first.
10. Consider an Electric Company Car
Benefit-in-kind rates on electric vehicles are still low single digits in 2026, and salary-sacrifice leases keep their advantage. For a higher-rate director, an EV through the company is one of the few remaining perks where the tax system actively helps.
11. Watch the Corporation Tax Marginal Band
Profits between £50,000 and £250,000 pay an effective marginal rate of 26.5% under marginal relief. Pension contributions or capital spending that pull profits back toward £50,000 do double duty. Broader planning moves like this appear in our tax planning tips for UK small businesses.
12. Use Full Expensing on Equipment
Qualifying plant and machinery gets a 100% first-year deduction, and the Annual Investment Allowance covers most other cases up to £1 million. If a big kit purchase is coming anyway, landing it before your year end brings the relief forward twelve months.
13. Charge Interest on Your Director's Loan
If you've lent the company money, charging a commercial rate of interest gives you personal income that's free of National Insurance, and the first £1,000 can fall within the personal savings allowance if you're a basic-rate taxpayer. The company deducts the interest as an expense. Paperwork required, but simple.
14. Plan Your Exit With Business Asset Disposal Relief
When you eventually sell or wind up the company, Business Asset Disposal Relief taxes qualifying gains at 14% from April 2025 (18% from April 2026) instead of the standard CGT rate, up to a lifetime limit of £1 million. Exit tax planning starts years before the exit, not the month of it.
15. Get a Professional Review Before Year End
Most of the strategies above interact: salary affects corporation tax, dividends affect personal tax, pensions affect both. Whether you even need ongoing help is a fair question, and we answered it honestly in Do I Need an Accountant for My Limited Company? A single pre-year-end planning conversation usually pays for itself several times over.
The Part Directors Get Wrong
The common failure isn't picking the wrong strategy. It's doing nothing until the accounts are due, when the tax year has closed and every option above has expired. Put a planning review in the diary for February, not July. If you want an ACCA-qualified accountant to run that review for a fixed fee, book a free consultation with ASPIRE UK and bring your latest management figures.
