For years, the standard advice for company directors was simple: pay yourself a small salary and take the rest of your income as dividends.
It was sound advice for many years. Dividends attracted lower tax rates than salary, National Insurance could often be minimised, and companies benefited from lower Corporation Tax rates.
But times have changed.
With increases in Corporation Tax, higher Dividend Tax rates, and continual changes to the UK tax system, the strategy that worked five or ten years ago may no longer be the most tax-efficient option for you today.
At Bidwell Accountancy, we're finding that many business owners are still following an outdated strategy simply because nobody has reviewed their position.
The Tax Landscape Has Changed
Several significant tax changes have altered the way directors should think about remuneration.
These include:
Higher Corporation Tax rates for many limited companies.
Increased Dividend Tax rates.
A reduced Dividend Allowance.
Changes to National Insurance thresholds and rates.
Changes to Employment Allowance eligibility.
Pension contribution opportunities.
Future tax changes that continue to reshape the most efficient way of extracting profits.
When you combine all of these together, the old "minimum salary, maximum dividends" approach doesn't always produce the lowest overall tax bill.
Every Director's Situation Is Different
There is no longer a "one-size-fits-all" solution.
The most tax-efficient mix of salary and dividends depends on factors such as:
Your company's annual profits.
Corporation Tax payable.
Your other personal income.
Whether you have a spouse who is also a shareholder.
Pension contributions.
Student loan repayments.
Child Benefit considerations.
Your future plans for mortgage applications or borrowing.
Whether you're building qualifying earnings for your State Pension.
Sometimes increasing your salary slightly can actually reduce your overall tax burden once Corporation Tax savings are taken into account.
In other situations, dividends will still remain the best option.
The important point is this:
You won't know unless somebody actually does the calculations.
Is Your Accountant Reviewing This Every Year?
This is one question every company director should ask.
Too many accountants simply roll forward last year's payroll and dividend strategy without reviewing whether it is still the most efficient approach.
If your accountant hasn't recently discussed:
Your salary level,
Your dividend strategy,
Changes to tax legislation,
Your overall tax position,
then you have to ask yourself...
Are they being proactive or simply processing your accounts?
A proactive accountant should be looking for opportunities to reduce your tax bill—not just completing your year-end accounts.
Don't Leave Money with HMRC Unnecessarily
Even relatively small changes to your remuneration strategy can make a meaningful difference over the course of a year.
For some directors, that could mean saving hundreds of pounds.
For others, particularly profitable companies, it could mean saving several thousand pounds over time.
Every pound saved in unnecessary tax is another pound that can be invested back into your business, your family or your future.
How Bidwell Accountancy Can Help
At Bidwell Accountancy, we don't believe in applying the same formula to every client.
We review each director's circumstances individually and consider:
The latest tax legislation.
Corporation Tax implications.
Personal tax liabilities.
Dividend planning.
Salary optimisation.
Pension planning opportunities.
Future tax changes.
Our aim is simple: help you keep more of what you earn while remaining fully compliant with HMRC rules.
That's what having a proactive accountant looks like.
When Was the Last Time Your Accountant Asked This Question?
"Is this still the most tax-efficient way for you to pay yourself?"
If you can't remember the last time that conversation happened—or it has never happened—it may be time for a second opinion.
At Bidwell Accountancy, we're passionate about helping business owners make informed decisions rather than relying on outdated advice.
Whether you're already a client or you're considering changing accountants, we'd be happy to review your current remuneration strategy and explain whether you're paying more tax than you need to.
Speak to Bidwell Accountancy Today
If you're a limited company director and want to know whether your salary and dividend strategy is still the right one for 2026 and beyond, get in touch with our team.
We'll review your current position, explain your options in plain English, and help you build a tax strategy that's right for your business—not one based on advice that may no longer apply.
Bidwell Accountancy – Growing your business together.
Share this post: