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What’s the most tax-efficient Director’s salary in 2026?

In the various accounting forums on Facebook and LinkedIn, I see lots of accountants asking “what’s the new Director’s salary from April 2026”. 

Now, I’ve no problem with people asking for ideas and inspiration from their peers. The accountancy profession is full of great people always willing to help out a number cruncher in need.

But here’s my problem – these particular conversations always seem to revolve around the idea that there’s somehow ONE single magic number, and they will be telling ALL their clients to have an identical salary from April.

So if your accountant has just told you that a £12.5K salary is the best thing for you from April 2026, please ASK THEM how they came to that number. 

They might have done some meticulous workings based on your and your partners’ total financial position, and determined that was the optimum salary level. In which case, they’re a great accountant and you should stick with them.

Or they may just have read it somewhere online (or just asked Chat GPT 🙈) and thought “OK, I’ll go with that”. In which case, it’s probably time for a chat.

(Caveat: We are of course talking here about Directors who are also Shareholders in their business. If you’re ONLY a director or ONLY a shareholder, then take this article with a good pinch of salt)

 

We’re not in Kansas Anymore!

So much has changed in the last few years, that there is no longer a one-size-fits-all figure for what you should pay yourself. That also means if you’re still on the same salary as you were a few years ago, it’s time for a review.

For all our LTD company directors, we offer a Remuneration Planning service. This costs from £8 per month (+ VAT) per director, and for that modest outlay you’ll have a Chartered Accountant sitting down in a dark room with a massive calculator and a big cup of tea, working out the figures PURELY FOR YOU.

But what’s going on behind the curtain? Quite a bit. I’ll let you into a secret – for each Director (and their company) we first need to ascertain the following information:

 

For the company:

🔸Estimated rate of Corp Tax the company will pay in the coming year (this varies on a sliding scale between 19% and 26.5%)
🔸Estimated total Employer’s NIC bill for the year (for ALL staff)
🔸Whether the LTD is eligible for the Employment Allowance 
🔸A ‘commercial rate’ for the work performed by the Director
🔸The retained profits of the company brought forward
🔸Expected trading profits for the coming year
🔸Any caveats from third parties e.g. lenders who require a minimum Balance Sheet value or Profit figure.
🔸The shareholding structure e.g. share types and number of shares issued
🔸And, whether any shareholders are not directors (or vice-versa)

 

For the Directors Personally:

🔸How many Directors will be taking a salary
🔸The director’s other income sources
🔸Personal investments such as VCT, EIS and SEIS
🔸Availability of the Dividend Allowance and Savings Allowance
🔸Whether any other family members work in the business
🔸Everyone’s National Insurance category
🔸How many years’ State Pension entitlement already accrued
🔸Eligibility for Class 1 National Insurance Deferment
🔸Level of existing pension contributions
🔸Amount of Pensions Annual Allowance remaining
🔸Gift aid donations expected
🔸How much Child Benefit is received, and by whom
🔸Student Loans outstanding – what Plan Type, and how much is left
🔸What income they might need to show for mortgage purposes

And, perhaps the most important figure:

🔸What ££ figure, after tax, is a minimum you need to draw from the company each year?

What should I do now?

 

Hopefully you’ve realised there’s a LOT of moving parts here, and you really do need to pony up and get your accountant to spend some time running the numbers for you personally. Their time won’t be free, but it’ll be worth it – even if your existing salary is still the right one for you, what you’ll benefit from is something invaluable:

Peace of mind.

But, I can tell you that from work we’ve done with clients around this, the most common salaries to take are at levels ranging from £5K and £12.5K.

However, we’re finding more and more clients where a salary approaching c.£40K is in fact preferable for profitable, family-run companies.

And at the top end, I have a couple of very profitable businesses where we are recommending six-figure salaries, and for the directors to take almost no dividends at all.

If you’re a client of Blue Penguin and you’d like us to add Remuneration Planning to the services we already provide for you, drop me a message.

Equally, if you’ve got an accountant but have a suspicion they have gone for a blanket approach on this, perhaps it’s time for a change? Head over to our contact page or click the orange button and let’s see what we can do for you ↘️

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