Salary or Dividends in 2026/27: What Is the Most Tax-Efficient Mix?

Posted on 18th October 2026 by debbie

If you run a limited company, deciding how to pay yourself can make a significant difference to your take-home income and your company’s tax bill.

A combination of salary and dividends remains worth considering for many director-shareholders. However, higher dividend tax rates in 2026/27 mean it is time to review your figures.

The most tax-efficient mix depends on your company’s profits, your other income and whether your business can claim Employment Allowance. See our blog here on this topic.

Here is how to approach the decision.

What has changed for 2026/27?

The 2026/27 tax year runs from 6 April 2026 to 5 April 2027. The basic and higher dividend tax rates have both increased by two percentage points, while the additional rate remains unchanged.

Dividend tax band	2026/27 rate
Basic rate	10.75%
Higher rate	35.75%
Additional rate	39.35%

The annual dividend allowance remains £500. Dividends covered by any unused Personal Allowance are also tax-free. However, the £500 dividend allowance still uses part of your tax band; it does not extend the basic-rate band.

These changes make reviewing your remuneration worthwhile, even if your business and personal circumstances have stayed the same.

Why the lowest personal tax bill may not give the best result

Salary and dividends affect the company differently.

Salary and related employer National Insurance are generally deductible when calculating taxable company profits, provided the costs meet the relevant rules. Dividends are paid from profits after Corporation Tax and do not qualify as a business expense.

For most trading companies, Corporation Tax is 19% on profits of £50,000 or less and 25% above £250,000, with marginal relief potentially available between those limits. The thresholds can be reduced for associated companies and shorter accounting periods.

This means comparing the dividend tax rate with the salary Income Tax rate alone can give a misleading answer. You need to calculate the total company cost and the amount left in your pocket.

Is a £12,570 salary still worth considering?

For a director with a full Personal Allowance and no other income using it, an annual salary of £12,570 is a useful starting point to assess.

Assuming a full-year directorship and standard National Insurance treatment, that salary normally attracts no employee National Insurance or Income Tax. However, employer National Insurance is generally charged at 15% on salary above £5,000.

That produces an employer National Insurance bill of £1,135.50, before any Employment Allowance is applied.

The employer charge does not automatically make a lower salary better. The Corporation Tax relief on salary and employer National Insurance may still make £12,570 attractive overall.

The right comparison is therefore the combined tax cost of different salary levels, alongside the dividends needed to meet your income target.

How Employment Allowance changes the calculation

Employment Allowance can reduce eligible employers’ National Insurance bills by up to £10,500 in 2026/27. If your company qualifies and has sufficient unused allowance, it could cover the employer National Insurance on your director’s salary.

However, a company with only one director cannot claim where that director is the only employee liable for employer Class 1 National Insurance. Having someone else on the payroll does not automatically establish eligibility.

Before deciding your salary, check both whether the company qualifies and how much allowance its wider payroll will use.

A worked example of salary and dividends

Suppose a director takes:

A salary of £12,570.
Dividends of £37,700.
Total income of £50,270.

Assume they have their full Personal Allowance, no other income, no taxable benefits and no adjustments affecting their tax bands.

The salary uses the Personal Allowance. Of the dividends, £500 falls within the dividend allowance, leaving £37,200 taxed at 10.75%.

The resulting dividend tax is £3,999, leaving personal income after that tax of £46,271.

For the same salary and dividends in 2025/26, dividend tax would have been £3,255. The rate increase therefore adds £744 to the annual personal tax bill. These calculations use HMRC’s published dividend rates and allowance.

This illustrates the personal tax position, rather than proving this is the best mix. The company must also fund the salary, any employer National Insurance and the Corporation Tax due before profits are available for dividends.

Can the company afford the dividends?

Money in the company bank account is not necessarily available to distribute.

Dividends must be supported by sufficient distributable profits, taking account of losses and the company’s tax position. They also need proper approval and records, including dividend vouchers.

Before paying yourself, check current management accounts and leave enough cash for tax, suppliers, payroll and other commitments. A payment that helps your personal finances today should not create a company cash-flow problem next month.

A practical decision guide for directors

Start with how much net income you need from the business. Your accountant can then compare ways of providing that income using the same underlying company profit.

The review should cover:

Your other income: employment, pensions, rent and investment income can affect the allowances and tax bands available.
Company profits: the Corporation Tax position influences the benefit of salary deductions.
Employment Allowance: eligibility and remaining allowance can alter the salary calculation.
Your National Insurance record: a very low salary may affect whether the year counts towards contribution-based entitlements.
Timing and cash flow: consider when income is needed and when the company can afford to distribute profits.

If you do not need to withdraw all the profits, retaining some in the business may also be worth assessing. Employer pension contributions can form part of a wider remuneration review, subject to pension allowances, tax rules and your need for accessible income.

Review your mix before carrying it forward

There is no single salary-and-dividend formula that suits every director. A figure recommended to another business owner may produce a different result for you.

At Spicer & Co, we can help you compare the options, understand the combined company and personal tax costs, and plan withdrawals around your business’s cash flow.

Book a free initial consultation with Spicer & Co to review your salary and dividends for 2026/27 and find a mix that works for you.

Figures reflect the rules checked on 1 October 2026. Examples are illustrative; individual circumstances can change the outcome.

Employment Allowance 2026/27

Posted on 13th October 2026 by debbie

Employment Allowance 2026/27: Could your business claim £10,500?

Employment costs remain one of the biggest financial pressures facing UK businesses. With employer National Insurance charged at 15% above the relevant threshold in 2026/27, every available relief deserves careful attention.

One of the most valuable is Employment Allowance.

For the 2026/27 tax year, eligible employers can reduce their employer Class 1 National Insurance bill by up to £10,500. This can create a significant saving for businesses, charities and other organisations with employees.

However, the allowance is not applied automatically. Employers must check that they qualify and submit a claim through their payroll.

What is Employment Allowance?

Employment Allowance allows an eligible organisation to reduce the employer Class 1 National Insurance contributions it pays through PAYE.

Once a claim has been made, the allowance is normally applied each time payroll is processed. The employer pays less National Insurance until one of two things happens:

The full £10,500 allowance has been used.
The tax year ends.

It is important to understand that Employment Allowance is not a £10,500 cash payment. The amount your business saves depends on its actual employer Class 1 National Insurance liability.

For example, if your qualifying employer National Insurance bill for the year is £7,000, the allowance could potentially reduce that liability to zero—but you would not receive the unused £3,500 as a payment. HMRC confirms that the allowance can only be used against the relevant employer National Insurance liability.

Who may be eligible for Employment Allowance?

Employment Allowance is generally available to eligible businesses and charities, including Community Amateur Sports Clubs. Certain employers of care and support workers may also qualify.

A significant change introduced from April 2025 removed the previous rule that prevented employers with more than £100,000 in employer Class 1 National Insurance liabilities from claiming. This means the size of an employer’s previous National Insurance bill no longer automatically prevents a claim for 2026/27.

However, eligibility should never be assumed. The circumstances of the business, its employees and any connected companies must all be considered.

Who cannot normally claim?

Your business may not qualify if:

It is a public body or carries out more than half its work in the public sector, unless it is a charity.
It is a limited company where the only employee liable for employer Class 1 National Insurance is the sole director.
The relevant liability relates to workers covered by the off-payroll working rules.
The employees are engaged for personal, household or domestic work, such as a nanny or gardener, unless an exception applies for a care or support worker.

A company with one director and no other relevant employees is therefore unlikely to qualify. However, if the company subsequently employs another person who meets the necessary conditions, it may become eligible during that tax year.

What if you have connected companies?

Connected companies require particular care. If two or more companies are connected at the beginning of the tax year, only one of them can normally claim Employment Allowance. The companies must decide which member of the group will make the claim.

Choosing the right company can make a financial difference, particularly where the businesses have different payroll sizes or employer National Insurance liabilities.

Similarly, an employer with more than one PAYE reference can only claim the allowance against one payroll. This makes it important to nominate the payroll where the allowance is most likely to be used effectively.

How much could your business save?

The maximum saving for 2026/27 is £10,500, but the actual benefit depends on the amount of qualifying employer National Insurance your business incurs.

For example:

An eligible employer with a liability of £4,500 could save up to £4,500.
An eligible employer with a liability of £10,500 could potentially use the full allowance.
An eligible employer with a liability of £18,000 could reduce that bill by £10,500, leaving £7,500 to pay.

The saving can support cash flow throughout the year because the allowance reduces the National Insurance paid as payroll is processed.

For a growing business, £10,500 could help fund recruitment, staff development, equipment, marketing or other investment. It is therefore worth checking your position rather than assuming your payroll software or HMRC will deal with it automatically.

How do you claim Employment Allowance?

If you use commercial payroll software, the claim is normally made by selecting “Yes” in the Employment Allowance indicator field when submitting an Employer Payment Summary to HMRC.

Businesses using HMRC’s Basic PAYE Tools can also submit a claim through that system.

The claim must be made for each tax year. It does not automatically continue indefinitely simply because the business qualified previously.

You can claim at any point during the tax year, but claiming earlier means your business can benefit from the reduction sooner. HMRC also allows qualifying employers to make claims for certain previous tax years, subject to the rules that applied during those years. If you need help with payroll please contact us as we offer full payroll services.

Why should eligibility be reviewed each year?

A business’s circumstances can change. You may have:

Appointed or removed directors.
Employed your first member of staff.
Created a new PAYE scheme.
Become connected with another company.
Taken on public-sector contracts.
Changed the way contractors are engaged.
Reorganised your payrolls.

Any of these developments could affect how or where a claim should be made.

Even if you claimed Employment Allowance last year, it is sensible to review your eligibility before submitting the next claim. Equally, if you were previously unable to claim, changes to the rules or your workforce could mean that you now qualify.

Could your business be missing out?

Employment Allowance can offer a substantial reduction in employment costs, but it needs to be claimed correctly. Mistakes may result in a business missing valuable relief or claiming an allowance to which it is not entitled.

At Spicer & Co, we can review your circumstances, help establish whether your business qualifies and ensure the claim is dealt with correctly through payroll.

If you would like help with Employment Allowance or want to discuss outsourcing your payroll, contact the Spicer & Co team. We can help you meet your reporting responsibilities while making sure your business is benefiting from the reliefs available to it.

This article provides general information based on the rules for the 2026/27 tax year. Eligibility depends on individual circumstances, and professional advice should be sought before making a claim.

Companies house identity verification: A checklist for Directors and PSCs

Posted on 19th September 2026 by debbie

Companies House has introduced compulsory identity verification for people who set up, run, own or control UK companies.

The new requirements are intended to improve the accuracy of the Companies House register and make it harder for people to use false or stolen identities for illegal purposes.

Identity verification became a legal requirement from 18 November 2025, with a 12-month transition period for existing directors and people with significant control, known as PSCs. The date by which you must provide your verification details depends on your role and circumstances.

If you are a company director, shareholder or PSC, here is what you need to know and do.

Who needs to verify their identity?

The requirements apply to:
• Existing company directors
• New directors
• People with significant control
• Individuals incorporating a new company
• Members of limited liability partnerships
• Relevant officers of certain organisations
• Individuals registering as Authorised Corporate Service Providers

Further identity verification requirements will be introduced for other roles at a later date, including some people who file information at Companies House.

What is a person with significant control?

A PSC is someone who owns or controls a company. This could include someone who:
• Holds more than 25% of the company’s shares
• Controls more than 25% of the voting rights
• Has the right to appoint or remove a majority of the board
• Exercises significant influence or control over the company
• Controls a trust or firm that meets one of the relevant conditions

In many small businesses, the same person is both a director and a PSC. However, Companies House treats these as two separate roles for identity verification purposes.

The Companies House identity verification checklist

1. Check your Companies House record
Before starting the verification process, search for your company on the Companies House register and review the information recorded against your name.
Check that your:
• Full name is correct
• Date of birth is correct
• Nationality is accurate
• Correspondence address is current
• Director and PSC appointments are correctly recorded
The personal information used to verify your identity must match the information Companies house holds. A difference involving your name or date of birth could prevent you from connecting your verified identity to your company role.
If anything is incorrect, arrange for it to be updated before your deadline.

2. Confirm whether you are a director, a PSC or both

Your responsibilities and deadline will depend on the roles you hold.
If you are both a director and a PSC of the same company, you must provide your personal code separately for each role.
Providing the code as part of the company’s confirmation statement for your director role does not automatically satisfy the requirement for your PSC role.
You should also identify every company in which you hold a director or PSC position. You only need to verify your identity once, but you must connect that verified identity to each relevant role.

3. Decide how you will verify your identity

There are two main ways to complete verification:
• Directly through GOV.UK One Login
• Through an Authorised Corporate Service Provider, or ACSP
An ACSP is a business such as an accountant, solicitor or company formation agent that is registered with Companies House and supervised under UK anti-money laundering regulations.
If you would prefer help with the process, ask your accountant whether they are registered as an authorised agent and can verify your identity.

4. Create your own GOV.UK One Login

If you choose to verify directly, you will need to sign in to or create a GOV.UK One Login.
Each individual must use their own email address. A shared business email address cannot be used to verify several different people.
Do not ask an employee, colleague or family member to create the account in their name or share their login details with you.

5. Prepare your identity documents

You may be able to verify online using:
• A biometric passport from any country
• A UK photocard driving licence, either full or provisional
• A UK biometric residence permit
• A UK biometric residence card
• A UK Frontier Worker permit
You will also need your current home address and the year you moved there.
Alternative routes may be available if you do not have suitable photo identification. Depending on your circumstances, you may be able to use bank or building society information and your National Insurance number, or complete part of the process at a Post Office.
If you use the Post Office route, you must begin the process online and provide your identity document details before visiting a branch.

6. Complete the identity check

Follow the instructions provided through GOV.UK One Login or your chosen authorised agent.
Make sure that:
• Your details are entered accurately
• Your identity document is valid for the selected verification route
• Any photograph requested is clear
• Your name matches the name on the Companies House register
• Your date of birth is correct
Companies House has specific rules concerning expired documents. For example, an expired passport cannot be used with the GOV.UK One Login app, while a DVLA driving licence may be accepted if it expired within the previous 90 days. Check the current guidance before beginning the process.

7. Find and securely store your personal code

Once your identity has been successfully verified, you will receive an 11-character Companies House personal code.
This code belongs to you as an individual, not to your company. You will use the same personal code for each relevant company and appointment.
If you verified using GOV.UK One Login, you can find the code by signing in to Companies House and selecting “Manage account”. Depending on when you verified, the code may also have been emailed to you.
If an ACSP completed the verification, Companies House will send the code to the email address supplied by the agent.
Store your code securely. You can share it with an accountant or other trusted person who is making an authorised filing on your behalf, but you should not distribute it more widely.

8. Provide the code for your director role

Existing directors must provide their personal code through the company’s confirmation statement.
If you are a director of more than one company, your code must be provided for each company. You only need to verify once, but each appointment must be linked to your verified identity.
New directors must provide their personal code as part of the appointment process. When a new company is incorporated, a personal code will be required for each proposed director.

9. Provide the code separately for your PSC role

PSCs have a specific 14-day period in which to provide their personal code. You can check your applicable dates on the Companies House register.
The deadline depends on your circumstances:
If you are both a director and a PSC of the same company:
Your 14-day period begins on the day after the company’s confirmation statement date. You must use the separate Companies House service for providing identity verification details as a PSC.
If you are a PSC but not a director of that company:
You must provide your personal code during the first 14 days of your birth month.
If you became a PSC after 18 November 2025:
You can provide the code when you are first added to the register or within 14 days of being added.
Filing a confirmation statement early does not bring forward or change the 14-day PSC verification window shown on the register.

10. Check that every appointment has been covered

After supplying your personal code, check that you have completed the process for:
• Every company of which you are a director
• Every company in which you are a PSC
• Both roles where you are a director and PSC
• Any newly created company or appointment
Do not assume that verifying once automatically updates every company record.
What if your details do not match?
If Companies House cannot connect your personal code to your record, check that:
• You have entered the personal code correctly
• The date of birth held by Companies House is correct
• Your name and other personal details match
• An ACSP has not submitted incorrect verification information
An incorrect date of birth may need to be corrected through Companies House before you can complete the process.
If you used an ACSP, contact the agent that verified your identity. They may need to correct the information they supplied.

What if you cannot meet your PSC deadline?

A PSC who cannot provide their verification details within the relevant 14-day period may be able to request a 14-day extension. The request must be made before the original deadline has passed.

Do not leave this until the final day. Check your dates in advance and seek help promptly if you expect a problem.

What happens if you do not comply?

Identity verification is a legal requirement. Failure to comply can lead to financial penalties or prosecution, and Companies House may ultimately display a note against the individual’s name on the public register. It may also cause problems when incorporating a company, appointing a director or completing future Companies House filings.

Directors’ and PSCs’ quick checklist

Before considering the process complete, confirm that you have:
• Checked your details on the Companies House register
• Identified every director and PSC role you hold
• Confirmed your applicable deadline
• Created your individual GOV.UK One Login, if verifying directly
• Gathered suitable identity documents
• Completed the identity verification process
• Received and securely stored your personal code
• Provided the code for every director appointment
• Provided the code separately for every PSC role
• Checked that Companies House has accepted the relevant filings
• Told your accountant that verification has been completed

How Spicer & Co can help

The identity verification rules create additional responsibilities for directors and PSCs, particularly where an individual is connected to several businesses or holds more than one role within the same company.
Spicer & Co can help you understand which requirements apply, check the information recorded at Companies House and ensure the necessary actions are completed by the relevant deadlines.

One problem we have been dealing with is when a company’s annual confirmation statement is due, we cannot file it until all directors/PSCs have completed their identity verification. If the annual confirmation statement is not filed within a certain time period, Companies House can start proceedings to strike the company off the register.

If you are unsure whether you have fulfilled your responsibilities as a director or PSC, please contact our team for guidance.

Please click on these links for current Companies House guidance on verification deadlines, how to verify and using a personal code.

Making Tax Digital: What to do after your first quarterly update

Posted on 13th September 2026 by debbie

If you are a sole trader or landlord within Making Tax Digital for Income Tax, submitting your first quarterly update was an important milestone.

However, it was only the first step in a new way of managing and reporting your financial records.

The first quarterly update deadline for the 2026/27 tax year was 7 August 2026. The update generally covered income and expenses recorded between 6 April and 5 July 2026, although some people may be using calendar quarters instead.

So what should you do now that you’ve submitted your first update?

Review your tax estimate carefully

After submitting your quarterly update, you should be able to see an estimated tax calculation through your compatible software or HMRC online account.

Remember, this is only an estimate. A quarterly update summarises the income and expenses recorded so far; it is not a complete tax return.

The estimate may not yet include all the information that will affect your final tax bill, such as:

Income from other sources
Savings interest or dividends
Pension contributions
Capital allowances
Losses brought forward
Tax reliefs
Private use adjustments
Payments on account

Use the estimate as a useful guide for financial planning, but do not assume it represents the exact amount you will eventually need to pay.

Check the information you submitted

Your quarterly figures do not need to include all the tax and accounting adjustments made at year-end. However, the update should still reflect the digital records you have kept for the quarter.

Review the information and check that:

All relevant sales and other business income have been recorded.
Business expenses have been included.
Transactions are in sensible categories.
Personal transactions have not been recorded as business expenses.
No duplicate or missing transactions.
Any income from separate businesses or rental properties has been dealt with correctly.

If you notice a mistake, do not ignore it. Your records can be corrected through your compatible software, and the amended information can be reflected in a later update or corrected before your final tax return is submitted.

If you are unsure how to correct something, speak to your accountant before making changes.

Set money aside for your future tax bill

One potential benefit of MTD is that it gives you greater visibility of your income and expenses throughout the year.

Rather than waiting until January to discover how much tax you owe, you can use your quarterly information to make a more informed estimate and start putting money aside.

Remember that MTD has changed how information is reported, but it has not introduced quarterly Income Tax payments. You will still normally pay your Income Tax and National Insurance through the existing Self Assessment timetable.

Your final tax bill may also include payments on account, so consider these when planning your cash flow.

Continue maintaining your digital records

Once you’ve submitted the first update, it can be tempting to return to old habits and leave everything until the next deadline. This risks creating another last-minute rush.

Continue recording your income and expenses in your MTD-compatible software throughout the quarter. Ideally, update your records at least weekly or monthly.

You may find it helpful to:

Connect your business bank account to your accounting software.
Upload and digitally store receipts.
Raise invoices through your software.
Reconcile your bank transactions regularly.
Keep business and personal spending separate.
Review outstanding invoices and unpaid bills.

Keeping your records current should make each future submission quicker and reduce the risk of errors.

Prepare for your second quarterly update

For most people using standard tax-year quarters, the second update will cover records from 6 April to 5 October 2026 and must be submitted by 7 November 2026.

The remaining deadlines for the 2026/27 tax year are:

7 November 2026: Second quarterly update
7 February 2027: Third quarterly update
7 May 2027: Fourth quarterly update
31 January 2028: MTD-compatible tax return and payment deadline for 2026/27

Each quarterly update provides cumulative totals from the beginning of the tax year. Your software should calculate and submit these figures, but you must ensure the underlying records are complete.

If you have more than one self-employed business or receive both self-employment and property income, you will generally need to send an update for each qualifying income source.

Do not forget your previous Self Assessment return

The introduction of MTD does not remove any outstanding responsibilities from previous tax years.

If you entered MTD for Income Tax from April 2026, your 2025/26 Self Assessment tax return must still be submitted in the usual way by 31 January 2027. You must also pay any tax due for that year by the same deadline.

Your first MTD tax return for the 2026/27 tax year will then be due by 31 January 2028.

It is therefore important to keep the two obligations separate and make sure neither deadline is overlooked.

Speak to your accountant about how the first quarter went

Your first quarterly update is an opportunity to identify any problems with your record-keeping process.

Ask yourself:

Did I find it easy to maintain my digital records?
Were there transactions I did not know how to categorise?
Did I struggle to separate business and personal expenses?
Was information missing when the deadline approached?
Is my current software suitable for my needs?
Do I understand what I need to do before the next submission?

Your accountant can review the process, help resolve any issues and recommend ways to make the next quarter easier.

What if you missed the first deadline?

If you were required to submit an update by 7 August 2026 but have not yet done so, take action as soon as possible.

HMRC has confirmed that it will not apply penalty points for late quarterly updates during the first mandatory year of MTD for Income Tax, covering 2026/27. However, this does not remove the requirement to submit the update, and penalties can still apply if your annual tax return or tax payment is late.

The best approach is to bring your records up to date now and avoid letting one missed update become a bigger problem.

Making MTD work for your business

MTD for Income Tax involves more frequent reporting, but it can also encourage better bookkeeping and provide a clearer view of how your business is performing.

The key is to treat digital record-keeping as an ongoing part of running your business and not simply something to address shortly before each quarterly deadline.

If you need help checking your first quarterly update, correcting your records or preparing for the next deadline, speak to the team at Spicer & Co. We can help you understand your responsibilities, manage your MTD submissions and ensure you remain on track throughout the tax year.

The dates and requirements in this blog reflect current HMRC guidance. Quarterly updates are summaries rather than tax returns, and the resulting figure is only an estimate. HMRC’s quarterly-update guidance and its step-by-step MTD collection provide the official details.

How to pay a Limited company Director

Posted on 24th August 2026 by debbie

Many of our clients run limited companies. As their accountant, one of the most common questions we’re asked is: “What’s the best way to pay myself?”

For many owner-managers, the answer is a combination of salary and dividends. Getting the balance right can make a significant difference to both your personal tax bill and your company’s finances. As allowances and tax rates have changed significantly in recent years, it’s important to review your situation and determine the right balance for you. It may have changed!

Are you an owner-manager of a limited company?

If so, you are not alone in facing the “how should I pay myself?” dilemma. Companies House estimates that 88% of UK companies (over 1.6 million) have at least one Company Owner Manager (COM). Within this group, 720,720 private limited companies have just one COM. (gov.uk)

Payment Options for Company Owner Managers

Salary

Directors can also be employees of their limited companies. This means you can pay yourself through your payroll system.

A salary is an allowable business expense, meaning it can reduce your company’s taxable profits and therefore its Corporation Tax bill. However, salaries can also trigger employer and employee National Insurance contribution liabilities.

For 2026/27, your standard tax-free Personal Allowance is £12,570, while employee National Insurance is generally charged at 8% between the primary threshold (£242 per week) and upper earnings limit (£967 per week). Employers generally pay National Insurance at 15% above the secondary threshold (£96 per week or £5,000 per year).

With these contributions in mind, paying yourself a large salary isn’t necessarily the most tax-efficient approach.

Dividends

Dividends are paid to you as a shareholder from your company’s available, distributable profits. Dividend payments reflect shares owned rather than work carried out.

One major advantage is that dividends do not attract National Insurance contributions.

However, dividend payments could attract a tax liability. For 2026/27, the dividend allowance is just £500. Dividends above this are taxed at 10.75% for basic-rate taxpayers, 35.75% for higher-rate taxpayers and 39.35% for additional-rate taxpayers.

Your company must also have sufficient profits to legally pay a dividend.

A combination of salary and dividends

For many directors, a tax-efficient combination of a modest salary plus dividends can work well. But there isn’t a one-size-fits-all answer.

Your ideal mix will depend on your company’s profits, other income, pension contributions, personal tax position and whether you need to retain funds in the business.

Corporation tax rates range from 19% for smaller profits up to £50,000 to 25% for larger profits over £250,000. Therefore, planning when and how you extract profits is important.

‘The key to paying yourself as a company owner-manager is to plan when you’ll extract funds from your company, rather than simply taking money when you need it,’ explains Shivani, trainee Chartered Accountant at Spicer & Co Chartered Accountants in Dunstable. ‘A little planning can go a long way to minimising your tax liability.’

As your accountant, we can look at the numbers for your particular circumstances and help you decide how much to take as salary and/or as dividends. We can also advise what funds should potentially be left in the company.

Would you like to review your payment arrangement? Talk to the friendly experts at Spicer & Co Chartered Accountants. Let’s arrange an initial discussion without obligation or jargon, just good advice and great coffee!

What records should a Limited company keep?

Posted on 24th August 2026 by debbie

Good record-keeping underpins a well-run limited company. From invoices and bank statements to shareholder information and company decisions, there are a number of records your limited company is obliged to keep. Getting this right can save you time, money and a lot of unnecessary stress.

What financial records do you need to keep?

Your company’s accounting records need to be detailed enough to show and explain its transactions and allow you to prepare accurate accounts.

That means keeping records such as:

Sales and purchase invoices
Receipts and expenses
Bank statements
Money paid into and taken out of the business
Details of assets and liabilities
Stock records, where relevant
Contracts and other documents supporting significant transactions
Records supporting the figures in your accounts and tax returns

Ultimately, you should be able to look at your records and understand where the company’s money has come from, where it has gone and how the figures in your accounts have been calculated.

Record-keeping beyond the numbers

Limited companies also have wider responsibilities around their corporate records. It is the directors’ responsibility to ensure the company keeps adequate and accurate records.

You must keep details of:

Shareholders and the results of any shareholder votes and resolutions.
Promises for the company to repay loans at a specific date in the future (‘debentures’) and who they must be paid back to.
Promises the company makes for payments if something goes wrong and it’s the company’s fault (known as “indemnities”).
Transactions when someone buys shares in the company.
Loans or mortgages secured against the company’s assets.

Some records should be submitted and maintained externally, such as providing registers of directors, directors’ residential addresses, company secretaries or people with significant control (PSCs) to Companies House.

How long should you keep your records?

You must keep records for 6 years from the end of the last company financial year they relate to, or longer if:

They show a transaction that covers more than one of the company’s accounting periods.
The company has bought something that it expects to last more than 6 years, like equipment or machinery.
Your corporate tax return was submitted late.
HMRC has started a compliance check into your corporate tax return.

Most companies now keep digital records. It’s important to ensure this data is secure and backed up regularly. A good cloud accounting system such as Xero helps to organise your financial records efficiently.

Informing business decisions

Keeping accurate records isn’t simply about satisfying HMRC or Companies House.

‘Up-to-date accounts and bookkeeping can show you whether you’re actually making money, where your cash is going, what you’re owed and what you owe,’ says Anna, Accounts and Operations Manager with Spicer & Co Chartered Accountants in Dunstable. ‘They can also highlight potential problems before they become real with potential costs attached.

‘Importantly, accurate, well-organised records help you plan ahead, making informed, proactive business decisions.’

How we can help

Is your company’s record-keeping up to scratch? A quick review now could save you considerably more time and hassle later. Let’s arrange an initial discussion without obligation.