Limited Company Tax Guide 2026/27: Corporation Tax, Dividends & Director Tax

Here's a number that stops most directors in their tracks: if your company's profits sit between £50,000 and £250,000, the next pound you earn is taxed at 26.5%. Not 25%. Not 19%. A rate that doesn't even appear on the official rate card, hiding inside something called marginal relief. I've watched directors discover this halfway through a year-end meeting and physically wince.

That's the trouble with limited company tax in the UK. It isn't one tax, or even three. It's a web of thresholds, allowances and interacting rules, and the rules for 2026/27 have shifted again after the Autumn Budget 2025. Dividend tax has gone up. Section 455 has gone up with it. Capital allowances have changed. Companies House now wants to verify who you actually are.

I put this guide together because I got tired of watching capable, hard-working business owners pay more tax than they needed to, simply because nobody had sat them down and explained how the pieces fit together. This is that sit-down. We'll cover corporation tax, how to pay yourself, director's tax, expenses, director's loans, benefits in kind, company cars, pensions, capital allowances, R&D relief, VAT, losses, IR35, closing a company, deadlines, and the Companies House changes every director needs to know about.

Each section below gives you the honest, no-nonsense version. Where a topic deserves a deeper dive, we've linked through to a full standalone guide — some of those are live now, and we'll be adding the rest over the coming months. Bookmark this page. Treat it as your reference point for the whole 2026/27 tax year.

Limited Company Tax 2026/27 – At a Glance

Before we go section by section, here's the headline picture. If you only have five minutes, this is what to know.

Key Limited Company Tax Rates for 2026/27

• Corporation tax: 19% small profits rate (profits up to £50,000), 25% main rate (profits over £250,000), with marginal relief tapering the rate in between at an effective 26.5% on profit within that band.
• Dividend tax: 10.75% basic rate, 35.75% higher rate, 39.35% additional rate, with a £500 tax-free dividend allowance.
• Employer National Insurance: 15% on earnings above the £5,000 secondary threshold, with an Employment Allowance of up to £10,500 for eligible employers.
• VAT registration threshold: £90,000 of rolling 12-month turnover.
• Annual Investment Allowance: £1 million on qualifying plant and machinery.
• Section 455 tax on overdrawn director's loans: 35.75%, tracking the dividend upper rate.

What Has Changed for 2026/27?

The single biggest change is dividend tax. Both the basic and higher dividend rates rose by two percentage points from April 2026, following the Autumn Budget 2025. That sounds small on paper. In practice, it means a director drawing a typical salary-and-dividend combination is paying several hundred pounds more this year than last, for exactly the same income. Section 455 tax on director's loans rose in step, because by law it tracks the dividend upper rate. Capital allowances have also shifted, with the main pool writing-down allowance dropping to 14% and a new 40% first-year allowance introduced from January 2026. And Companies House identity verification, which started in November 2025, is now working its way through every company's confirmation statement cycle. We'll unpack all of this below.

Corporation Tax for Limited Companies

What Is Corporation Tax?

Corporation tax is the tax your limited company pays on its profits — trading profits, investment income, and capital gains alike. It's separate from anything you personally pay as a director or shareholder. Your company files its own tax return, on its own timetable, regardless of what happens in your personal finances.

How Much Corporation Tax Does a Limited Company Pay?

For 2026/27, companies with profits of £50,000 or less pay the small profits rate of 19%. Companies with profits above £250,000 pay the main rate of 25%. In between, marginal relief applies — and this is the part that catches people out, because the effective rate on profit within that band works out at 26.5%, higher than the headline main rate itself.

How Is Corporation Tax Calculated?

You start with your accounting profit, add back anything that isn't tax-deductible (client entertaining is the classic example), and deduct allowable reliefs like capital allowances. What's left is your taxable profit, and that's the figure the rates above apply to. It sounds simple. In my experience, it's the add-backs and reliefs that make or break the final bill.

What Is Marginal Relief?

Marginal relief is a formula — using a fraction of 3/200 for 2026/27 — that smooths the jump between the 19% and 25% rates. Rather than a company falling off a cliff edge the moment it crosses £50,000 of profit, tax increases gradually across the band up to £250,000. It's fair in principle. It's also easy to get wrong by hand, which is precisely why we run every client's figures through proper software rather than a back-of-envelope guess.

What Are Associated Companies?

If you own more than one company, or a company you control is connected to another, the £50,000 and £250,000 thresholds get divided between them. Two associated companies means each one's threshold is effectively halved. This trips up directors who've set up a second company for a new venture without realising it changes the tax position of the first.

Can Corporation Tax Be Reduced Legally?

Yes, and this is where good planning earns its keep — through pension contributions, capital allowances, R&D relief, and the timing of income and expenditure around your year end. We cover each route in detail further down this page.

Read our full guide: Corporation Tax for Limited Companies — Rates, Reliefs & Worked Examples →

How Should a Director Pay Themselves in 2026/27?

Salary or Dividends – Which Is More Tax Efficient?

For years, the answer was straightforward: take a small salary, top up with dividends, and save a meaningful amount of tax versus being paid entirely through PAYE. That gap has narrowed sharply. Between the dividend tax rise, employer National Insurance at 15%, and the reduced secondary threshold, the maths now depends heavily on your company's profit level and your own income tax band. There's no longer a single "right" answer that applies to every director.

Salary vs Dividends – Worked Example

Picture a director drawing a salary at the National Insurance secondary threshold, with the rest of their income taken as dividends. For 2026/27, they'll notice two things compared with last year: their dividend tax bill has crept up by roughly £20 for every £1,000 drawn above the allowance, and if their company also employs staff, Employment Allowance may soften the employer NI hit. Run your own numbers — the outcome for a sole-director company with no other staff looks meaningfully different from one with a small team.

When Is Taking More Salary Better Than Dividends?

Salary becomes more attractive when it's fully covered by Employment Allowance, when you need to maximise pension annual allowance headroom (salary is relevant earnings for pension purposes, dividends are not), or when you're building toward statutory benefits like maternity pay or a higher state pension record.

Can I Take Dividends Instead of Salary?

You can, but a company with no salaried directors at all can raise questions with HMRC and affects your qualifying years for the state pension. Most directors we work with take a modest salary and top up with dividends, though the exact split is worth reviewing every year rather than leaving on autopilot.

How Much Dividend Can I Take From My Limited Company?

Only as much as your company has in distributable reserves — realised, after-tax profits. Taking dividends beyond that isn't a grey area; it's technically unlawful, and it can be unwound and reclassified, sometimes as a director's loan, which brings its own tax charge.

How Are Dividends Taxed in 2026/27?

The first £500 of dividend income is tax-free. Above that, the rate depends on your total income: 10.75% within the basic rate band, 35.75% within the higher rate band, and 39.35% within the additional rate band.

Do I Need to Pay Tax on Dividends?

If your total dividend income for the year is within the £500 allowance, no. Above that, yes, and it's reported through Self Assessment.

How Do I Declare Dividends?

Properly, and on paper. You need board minutes recording the decision and a dividend voucher for each payment, dated before the money is drawn. Skipping this step is one of the most common — and most easily avoided — mistakes we see at year end.

Read our full guide: How Should Directors Pay Themselves in 2026/27? →

Director's Tax – What Tax Does a Company Director Pay?

Income Tax for Directors in 2026/27

Salary is taxed through PAYE in the normal way, against your personal allowance of £12,570 and the usual 20%, 40% and 45% bands.

National Insurance for Directors

Directors pay employee National Insurance on salary above the primary threshold, and the company pays employer National Insurance above the secondary threshold of £5,000. Director NI is usually calculated on an annual earnings basis rather than month by month, which can produce an uneven pattern through the year if you're not expecting it.

Dividend Tax for Directors

As above — 10.75%, 35.75% or 39.35%, depending on your band, after the £500 allowance.

Self Assessment for Company Directors

Almost every director needs to file a Self Assessment return, even if all the tax due has already been collected through PAYE, because dividend income needs declaring separately.

When Is a Director's Tax Return Due?

31 January following the end of the tax year, for both filing online and paying any balance due.

What If I Have Other Income?

Rental income, savings interest, a second job — it all goes on the same return, and it can push you into a higher band faster than you'd expect once dividends are added on top.

Read our full guide: Director's Tax Explained: What Company Directors Pay and When →

Allowable Expenses for a Limited Company

What Expenses Can a Limited Company Claim?

The test HMRC applies is whether a cost was incurred "wholly and exclusively" for business purposes. Genuinely mixed-use costs need a fair, defensible split.

Common Allowable Limited Company Expenses

• ‍Office costs — rent, utilities, stationery and software are all straightforward claims. ‍
• Telephone and internet — claimable where there's business use, with private use apportioned out.
• Professional fees — accountancy, legal and consultancy fees are deductible.
• Advertising and marketing — website costs, print and digital advertising, and sponsorship all qualify.
• Business insurance — professional indemnity, public liability and similar cover are allowable.
• Training and professional development — costs that maintain or update existing skills qualify; training for a genuinely new skill set is treated more cautiously by HMRC.
• Business travel — journeys to clients, sites and temporary workplaces are claimable; the daily commute to a permanent workplace is not.
• Subsistence — reasonable food and drink costs when travelling for business, tied to a qualifying journey.
• Mileage — HMRC's approved mileage rates let you claim a per-mile amount for business journeys in your own vehicle without keeping every fuel receipt.
• Working from home — either a flat-rate allowance or a proportion of actual household costs, depending on your circumstances.
• Equipment and computer costs — laptops, monitors and other kit used for the business, usually relieved through capital allowances.
• Pension contributions — one of the most generous and most underused reliefs available, covered in detail further down.

What Expenses Can a Limited Company Not Claim?

Client entertaining is the big one — it's simply disallowed for tax purposes, whatever the invoice says. Fines and penalties, ordinary commuting, and personal expenses dressed up as business costs all fall the same way.

Can My Company Pay My Personal Expenses?

It can pay them, but that doesn't make them tax-deductible or tax-free for you personally. Paying a personal bill from the company account usually creates either a benefit in kind or a director's loan — both of which carry their own tax consequences, which we explain next.

Read our full guide: Allowable Expenses for Limited Companies — The Complete List →

Director's Loan Account Explained

What Is a Director's Loan?

Any money that passes between you and your company that isn't salary, dividend, expense repayment or a prior loan repayment. It's tracked in a running account, and the balance matters a great deal.

Can I Borrow Money From My Limited Company?

Yes, but the tax treatment depends on how much and for how long.

What Happens If I Owe My Company Money?

If your loan account is overdrawn at your company's year end and isn't repaid within nine months, your company faces a tax charge on the outstanding balance.

When Does a Director's Loan Become Taxable?

Once that nine-month window passes without repayment, Section 455 tax applies to the company, and if the loan is interest-free or on beneficial terms, you may also have a personal benefit-in-kind charge.

What Is Section 455 Tax?

It's a tax charged to your company, at 35.75% for 2026/27 (up from 33.75%, because the rate tracks the dividend upper rate) on the overdrawn balance. It's repayable to the company once the loan itself is repaid, but that can take a while to come back, and it's a real cash-flow hit in the meantime.

What Happens If I Repay the Director's Loan?

Once repaid, the Section 455 charge is refundable. But repay it and re-borrow a similar amount shortly after, and HMRC's "bed and breakfasting" rules can treat it as if it was never repaid at all.

Director's Loan – £10,000 Benefit-in-Kind Rules

If your loan balance goes above £10,000 at any point in the year and it's interest-free or below HMRC's official rate, it's treated as a benefit in kind, reportable on a P11D, with Class 1A National Insurance due from the company.

How to Avoid Director's Loan Account Problems

Keep the account reconciled throughout the year, not just at year end. I've seen directors genuinely shocked to discover a £15,000 overdrawn balance they'd lost track of, simply because nobody was watching the running total between visits to their accountant.

Read our full guide: Director's Loan Accounts — Rules, Tax and How to Avoid the Pitfalls →

Benefits in Kind for Company Directors

What Are Benefits in Kind?

Non-cash perks your company provides — a car, private medical cover, a phone — that HMRC treats as part of your taxable remuneration.

Company Car Tax 2026/27

Tax is based on the car's list price and CO2 emissions, banded into a percentage that's applied to work out your taxable benefit.

Electric Company Cars – Are They Tax Efficient?

Very much so, still. Electric vehicles sit in the lowest benefit-in-kind bands by a wide margin, which is why so many of our clients have switched their company car over the last couple of years.

Company Van Tax

Vans attract a flat annual benefit charge rather than the sliding scale used for cars, and it's considerably lower if private use is genuinely restricted to commuting.

Private Medical Insurance

A popular benefit, but a taxable one — the premium is reported on a P11D and taxed as income, with Class 1A NI due from the company.

Company Mobile Phone

One mobile phone per employee, provided by the company and in the company's name, is tax-free. A second phone, or reimbursing a personal contract, isn't covered by the same exemption.

Trivial Benefits for Directors

Small perks — up to £50 per benefit, capped at £300 a year for directors of close companies — can be provided tax-free, provided they're not cash and not a reward tied to performance.

Christmas Parties and Annual Functions

Annual staff events are tax-free up to £150 per head, covering the whole event including transport and accommodation, but go a pound over and the whole amount becomes taxable, not just the excess.

Benefits in Kind Reporting and Class 1A NIC

Most benefits are reported annually via a P11D, with Class 1A NIC paid by the company. Get the reporting wrong and penalties follow quickly, so this is one area worth having properly managed rather than left until the deadline looms.

Read our full guide: Benefits in Kind for Directors — What's Taxable and What Isn't →

Company Cars and Mileage – 2026/27

Company Car vs Personal Car – Which Is More Tax Efficient?

It depends almost entirely on the vehicle. A petrol or diesel car bought personally and claimed via mileage is often cheaper overall than the same car held through the company. An electric vehicle flips that conclusion on its head.

Electric Company Car Tax 2026/27

Low benefit-in-kind rates, full capital allowances available to the company, and no fuel benefit charge if you're only paying for electricity — it's currently one of the most tax-efficient purchases a profitable company can make.

Company Car Benefit-in-Kind Rates

Rates are banded by CO2 emissions and, for electric and low-emission vehicles, by electric range, rising gradually each year under rules already set out by the Treasury.

Can My Company Pay for Fuel?

Yes, but unless business mileage is very high, a separate fuel benefit charge on a petrol or diesel car often costs more than simply reimbursing actual business fuel at cost.

Mileage Allowance for Directors

HMRC's approved mileage rates let you claim a set amount per business mile in your own car, tax-free, without a company car benefit arising at all.

Company Car or Mileage – Worked Example

Take a director doing 8,000 business miles a year in their own diesel car. Claiming mileage at the approved rate will very often beat the tax cost of the same car held through the company — but swap that for a new electric vehicle bought by the company, and the answer usually reverses.

Read our full guide: Company Cars vs Mileage — Which Saves You More Tax in 2026/27? →

Pension Contributions Through a Limited Company

Can My Limited Company Pay Into My Pension?

Yes — and this is, in my view, one of the most underused reliefs available to owner-managed companies.

Are Employer Pension Contributions Tax Deductible?

Generally yes, as long as they meet the "wholly and exclusively" test, reducing your corporation tax bill directly.

Company Pension Contribution vs Dividend

A pension contribution avoids corporation tax, employer and employee National Insurance, and income tax entirely at the point of contribution. A dividend has already been taxed at 25% corporation tax before it even reaches your dividend tax rate. For a director not needing the income immediately, the difference is substantial.

How Much Can a Company Pay Into a Director's Pension?

Up to the annual allowance — currently £60,000 — as long as it's justifiable against your overall remuneration, without the earned-income restriction that applies to personal contributions.

Pension Annual Allowance 2026/27

£60,000 for most people, tapering down for very high earners.

Carry Forward of Unused Pension Allowance

Unused allowance from the previous three tax years can be carried forward, which is particularly useful in a strong profit year when you want to shelter more than the current year's allowance alone would permit.

When Are Company Pension Contributions Particularly Tax Efficient?

In a year when profits fall inside the marginal relief band, or when a director genuinely doesn't need every pound of profit drawn out immediately — a pension contribution can be the single most effective planning move available.

Read our full guide: Pension Contributions Through Your Limited Company — The Full Guide →

Capital Allowances and Tax Relief on Business Purchases

What Are Capital Allowances?

Tax relief for spending on business assets — equipment, machinery, certain vehicles — instead of an ordinary expense deduction.

Annual Investment Allowance – £1 Million

Most qualifying plant and machinery purchases can be deducted in full in the year of purchase, up to £1 million — enough headroom for the overwhelming majority of small and medium-sized companies.

Full Expensing for Limited Companies

Full expensing gives a 100% first-year deduction on qualifying new plant and machinery, and from January 2026 there's also a new 40% first-year allowance available on main-rate assets, alongside the main pool writing-down allowance, which has itself dropped to 14%.

Capital Allowances on Computers and Equipment

Laptops, servers and general office equipment almost always qualify and are usually covered comfortably within the Annual Investment Allowance.

Capital Allowances on Cars

Cars sit outside the Annual Investment Allowance and are relieved differently depending on CO2 emissions, with the cleanest vehicles attracting the most generous rates.

Electric Cars and 100% First-Year Allowances

New, unused electric cars can still qualify for a 100% first-year allowance — another reason electric vehicles keep coming up in almost every conversation we have about company purchases at the moment.

Should My Company Buy or Lease Equipment?

Buying claims capital allowances but ties up cash; leasing spreads the cost and the full payment is usually deductible as it's paid. The right answer depends on your cash flow and how quickly the asset will need replacing.

Read our full guide: Capital Allowances Explained — AIA, Full Expensing & What You Can Claim →

R&D Tax Relief for Limited Companies

What Qualifies as R&D?

Work that seeks a genuine advance in science or technology, resolving a technical uncertainty that a competent professional in the field couldn't have readily worked out. It's a lower bar than most directors assume, and it isn't limited to labs and software firms.

R&D Tax Relief 2026/27

The old separate SME and RDEC schemes have been merged into a single scheme for most companies, simplifying — and in some cases reducing — what was previously available.

The Merged R&D Scheme

One scheme now applies to the large majority of claims, replacing the old dual-scheme system and its very different rates.

R&D Expenditure Credit – 20%

The merged scheme gives an above-the-line credit worth 20% of qualifying expenditure, taxable but visible directly in the accounts as income.

Enhanced R&D Intensive Support

Loss-making companies where R&D spending makes up a high proportion of total expenditure can access an enhanced, more generous rate of relief under a separate intensive-support scheme.

What R&D Costs Can Be Claimed?

Staff costs, subcontractor and externally provided worker costs, software, consumables and certain utility costs used directly in the qualifying project.

R&D Claim Notification and Additional Information

Most first-time claimants, and many returning ones, now need to notify HMRC in advance and submit a detailed additional information form alongside the claim — miss either step and the claim is simply rejected, no matter how strong the underlying work.

Read our full guide: R&D Tax Relief for Limited Companies — 2026/27 Rules Explained →

VAT for Limited Companies

When Does a Limited Company Need to Register for VAT?

Once your taxable turnover exceeds £90,000 in any rolling 12-month period — not your tax year, and not your calendar year, but any 12 months, checked continuously.

VAT Registration Threshold 2026/27

£90,000, unchanged since it was last raised.

Should My Company Voluntarily Register for VAT?

Sometimes, particularly if your customers are VAT-registered businesses who can reclaim the VAT you charge, or if you're spending heavily and want to reclaim VAT on purchases.

Flat Rate Scheme – Is It Still Worth It?

Occasionally, for businesses with very low expenses, but the sector-specific percentages and the "limited cost trader" rate mean it's worth running the actual numbers before assuming it'll save money.

VAT Cash Accounting Scheme

Lets you account for VAT when money actually changes hands rather than on invoice dates — genuinely useful for cash flow if your customers are slow payers.

Making Tax Digital for VAT

Digital record-keeping and compatible software are mandatory for all VAT-registered businesses; paper records and manual VAT return submissions are no longer an option.

VAT on Director Expenses

VAT on genuinely business-related expenses can be reclaimed; VAT on personal or mixed-use costs needs the private element stripped out first.

Read our full guide: VAT for Limited Companies — Registration, Schemes and Deadlines →

Corporation Tax Losses

What Happens If My Limited Company Makes a Loss?

A loss isn't just bad news — it's also a tax asset. It can be set against other profits, carried back, or carried forward, depending on your circumstances.

Can Corporation Tax Losses Be Carried Forward?

Yes, and offset against future profits from the same trade, with few restrictions for most owner-managed companies.

Can I Carry Back a Company Loss?

A trading loss can generally be carried back one year against profits of the same trade, potentially generating a tax refund on tax already paid.

Corporation Tax Losses When Closing a Company

Special rules apply in a company's final 12 months, extending the carry-back period in some circumstances — worth checking before you wind anything up, not after.

Read our full guide: Corporation Tax Losses — How to Use Them to Your Advantage →

IR35 and Limited Companies

What Is IR35?

Legislation designed to catch situations where someone works through a limited company but, in all but name, is really an employee of their client.

Does IR35 Apply to My Limited Company?

It depends on the working relationship, not the paperwork — control, substitution rights, and mutuality of obligation all matter more than what the contract says on its cover page.

How Does IR35 Affect Salary and Dividends?

If a contract is caught, income from that engagement is broadly taxed as if it were salary, largely closing off the tax efficiency of dividends for that income.

Who Decides IR35 Status?

For engagements with medium and large private sector clients, the client makes the determination. For small clients, and for public sector engagements, different rules apply.

IR35 for Contractors Working Through Their Own Company

Getting a proper, contract-by-contract status assessment matters more than ever, because the financial consequences of getting it wrong land on the fee-payer as well as the contractor.

Read our full guide: IR35 Explained for Limited Company Contractors →

Selling or Closing a Limited Company

What Happens to Tax When I Close My Limited Company?

It depends heavily on the route you take and how much is left in the company — the difference in tax outcome between the options below can be enormous.

Striking Off a Limited Company

The simplest route for a company with modest reserves — an informal wind-up rather than a formal liquidation.

Members' Voluntary Liquidation

For companies with more substantial reserves, a formal liquidation can allow funds to be extracted as capital rather than as a dividend, often at a considerably lower tax rate.

Taking Money Out Before Closing a Company

Timing matters. Drawing funds in the "wrong" way, or in the wrong order, can turn what should have been a capital gain into income taxed at a much higher rate.

Capital Gains Tax When Selling Company Shares

Selling your shares, rather than the company's assets, triggers capital gains tax on the proceeds rather than corporation tax and income tax layered on top of each other.

Business Asset Disposal Relief

Where the conditions are met, this can reduce the capital gains tax rate on qualifying gains up to a lifetime limit — a genuinely valuable relief, but one with strict qualifying conditions that need checking well before a sale, not during it.

Read our full guide: Selling or Closing a Limited Company — Tax Implications Explained →

Limited Company Tax Deadlines 2026/27

Corporation Tax Payment Deadline

Nine months and one day after your company's year end — before your Company Tax Return is even due.

Company Tax Return Deadline

Twelve months after your year end, filed as a CT600.

Companies House Accounts Deadline

Nine months after your year end for a private limited company.

Confirmation Statement Deadline

Due annually, and now — critically — the trigger point for director identity verification under the new Companies House rules.

PAYE and National Insurance Deadlines

Monthly, by the 22nd if you're paying electronically, or the 19th by post.

Director's Self Assessment Deadline

31 January following the end of the tax year, for both online filing and payment.

Read our full guide: Every Limited Company Tax Deadline for 2026/27, in One Place →

Companies House Changes Directors Need to Know About

Companies House Identity Verification

Since 18 November 2025, identity verification has been compulsory for new directors and people with significant control (PSCs). It began a 12-month transition period, running to 17 November 2026, for everyone already in post.

When Do Directors Need to Verify Their Identity?

Existing directors must verify by the time their company's next confirmation statement is due after 18 November 2025. If you sit on the board of more than one company, your deadline is the earliest of all your confirmation statement dates.

People With Significant Control (PSCs)

PSCs who aren't directors face a similar requirement, generally tied to their month of birth rather than a confirmation statement date.

Confirmation Statement Changes

Your confirmation statement now needs to include each director's personal identity verification code once they've completed the process — leave it out, and the filing can be rejected outright.

Companies House Fees 2026

Filing fees have risen as part of the same package of reforms, alongside tighter enforcement of late filing penalties generally.

Read our full guide: Companies House Identity Verification — What Every Director Must Do →

Limited Company Tax Planning Checklist for 2026/27

Tax planning shouldn't be a scramble in March. A few habits, kept up through the year, make an outsized difference.

Before the Company Year End

Review your profit against the marginal relief band, consider bringing forward qualifying capital spending, and check whether a pension contribution would be more valuable this year than a dividend.

Before Taking a Dividend

Confirm distributable reserves actually support the payment, and get board minutes and a dividend voucher done at the time — not reconstructed months later.

Before 5 April 2027

Use your dividend allowance and personal allowance where you can, review your director's loan account balance, and check whether pension carry forward could shelter a larger contribution than usual.

Limited Company Tax FAQs

How Much Tax Does a Limited Company Pay?

Corporation tax at 19%, 25%, or an effective rate up to 26.5% in between, depending on profit level — plus VAT, employer NI and PAYE if the company has employees.

Is Corporation Tax 19% or 25%?

Both, depending on profit. 19% up to £50,000, 25% above £250,000, tapered in between.

How Do I Reduce Corporation Tax Legally?

Pension contributions, capital allowances, R&D relief where it applies, and careful timing of income and expenditure around your year end.

Is It Better to Take Salary or Dividends?

It depends on your company's profit, whether you employ others, and your personal income tax position — there's no single universal answer for 2026/27.

How Much Salary Should I Take From My Limited Company?

Most owner-managed companies set salary around the National Insurance secondary threshold, then top up with dividends, though this should be reviewed each year rather than assumed.

How Much Dividend Can I Take?

As much as your company's distributable, after-tax reserves genuinely allow — no more.

Do Directors Pay Tax on Dividends?

Yes, above the £500 dividend allowance, at 10.75%, 35.75% or 39.35% depending on your income tax band.

Can I Take Money Out of My Company Whenever I Want?

Only through salary, dividends against real reserves, expense reimbursement, or a properly recorded director's loan — anything else risks being reclassified, with a tax charge attached.

What Happens If I Take Too Much Money From My Company?

It's typically treated as a director's loan, which can trigger Section 455 tax on the company and a personal benefit-in-kind charge if it isn't repaid promptly.

What Expenses Can a Limited Company Claim?

Costs incurred wholly and exclusively for the business — office costs, travel, professional fees, equipment, pension contributions and more, covered in detail above.

Can My Limited Company Pay for My Phone?

Yes, tax-free, for one phone contract held in the company's name.

Can My Company Pay My Pension?

Yes — and it's one of the most tax-efficient ways to extract value from a profitable company.

Is an Electric Company Car Tax Efficient?

Currently, yes, very much so, thanks to low benefit-in-kind rates and generous capital allowances.

What Is a Director's Loan?

Money that passes between a director and their company outside of salary, dividends and expense repayments, tracked in a running account with its own tax rules.

When Does a Limited Company Need to Register for VAT?

Once taxable turnover passes £90,000 in any rolling 12-month period.

What Are the Limited Company Tax Deadlines?

Corporation tax payment nine months and a day after year end, the Company Tax Return twelve months after, accounts to Companies House nine months after, and Self Assessment by 31 January.

Do Limited Company Directors Need to Complete Self Assessment?

Almost always, yes, particularly once dividend income is involved.

Can I Close My Limited Company Without Paying Tax?

Rarely entirely tax-free, but the route you choose — striking off versus a formal liquidation — can make a very significant difference to how much tax is due.

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That's the full picture for 2026/27, but tax rules move fast, and your own situation will always be more specific than a general guide can cover. If you'd like us to look at your figures directly — your salary and dividend split, your capital spending plans, or simply whether you're paying more tax than you need to — get in touch with the team at Cannon Accountants. We'd genuinely rather have that conversation with you now than have you discover the gap at year end.

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