What is the Most Tax Efficient Salary for 2026/27?

Changes to tax in recent years mean that paying yourself as a director is more complex than ever.

In this blog, I’ll outline the key salary options to consider for 2026/27.

Option 1: Low Salary/No National Insurance

Annual Salary: £5,000

Monthly Salary: £416.67

Why choose this option?

• Salary is deductible for corporation tax.
• No PAYE or NI to pay over monthly.
• Very simple from an admin perspective.

This option best suits directors who want to keep things clean and low-maintenance. Though at this level, you would not qualify for state pension credit.

Due to the reduced level where employers start paying national insurance and the fact that you no longer qualify for state pension at this level, it is likely that more people will opt for option 2.

Option 2: Optimise the Personal Allowance

Annual Salary: £12,570 (assuming you are on a standard tax code of 1257L)

Monthly Salary: £1,047.50

Why choose this option?

• Generally the most tax-efficient overall.
• Corporation tax saving outweighs employer NI cost.
• Still qualifies for the state pension.

However, the company will have NI to pay (this could be reduced if you have employees and access to the £10.5k employment allowance), and you need to ensure that you are on top of payroll submissions and HMRC payments.

This option is best suited to you if you already have employees or are disciplined with your admin.

How to Know the Most Tax Efficient Salary for You

There is no simple answer these days – especially with dividend taxes increasing in 2026/27 (the basic-rate dividend tax is increasing from 8.75% to 10.75%, and the higher-rate dividend tax is increasing from 33.75% to 35.75%).

Determining the most tax-efficient salary for you can feel complicated, which is why planning is key.

If any of the following apply to you, we recommend seeking specific advice:

1. Your income is approaching £100,000: a larger salary strategy may be worth considering and could be more tax effective.
2. You're heavily involved in R&D: a higher salary can enhance your R&D tax credit claim, as qualifying staff costs feed into the calculation.
3. You have other employees: you'll have access to the Employment Allowance (£10,500 for 2026/27), which reduces your employer NI bill and can make option 2 even more attractive.
4. You're planning to buy a new house or remortgage your house: a low salary can cause issues.

 If you’re unsure whether your setup remains tax-efficient for 2026/2027, get in touch.