A limited company's tax bill isn't one number — it's layers: the company pays tax on profits, and you pay tax on what you take out. Understanding both layers (and the space between them) is exactly where planning saves money. Here are the 2026 numbers.
Layer one: Corporation Tax
- 19% on profits up to £50,000 (the small profits rate).
- 25% on profits of £250,000 and above (the main rate).
- Between the two, marginal relief tapers the rate gradually — the effective rate in this band is higher than many expect, which makes timing of costs and pension contributions genuinely valuable.
- Associated companies split these thresholds between them — two companies under common control share the bands.
Layer two: taking money out
- Salary: deductible for the company, taxed on you through PAYE like any employment income.
- Dividends: paid from post-tax profit; the first £500 is tax-free, then 8.75% (basic), 33.75% (higher) and 39.35% (additional rate).
- Employer pension contributions: usually the most tax-efficient pound the company can spend on you — deductible for the company, tax-free for you today.
- The optimal mix changes with rates and thresholds — a split that was right two years ago often isn't now.
Don't forget
- VAT once turnover passes £90,000 — registration is mandatory and late registration is expensive.
- Employer National Insurance on salaries above the threshold — a real cost of employing, including employing yourself.
- Corporation Tax is due 9 months and 1 day after your year end — before the return deadline itself.
A worked answer, for your company
Two companies with identical profits can pay meaningfully different total tax depending on how remuneration is structured. That's not a loophole — it's the system working as designed for those who plan. We'll run your numbers both ways and show you the difference.