Following a radical change to National Insurance rules for 2025/26 this is a generalised guide to the small salary big dividend method of rewarding yourself from your UK limited company for the tax year ended 5 Apr 2026.
Your own circumstances may lead to variations.
If you have no profit, then you cannot take drawings. Take care not to take personal drawings out of investor funding, bank loans or your company tax reserve. Investor funding and bank loans are not “profit”. Your company tax reserve is not “distributable profit”.
If your company can afford it, take a monthly salary of £1,047.00. That will lead to a monthly charge of Employer’s National Insurance of £94.50 being payable to HMRC (on top of the monthly £1,047.00 payable to you).
Check your payslip each month as your figures for gross and net may vary from this general picture.
If your company has distributable profit, and can afford to, you may want to take primary drawings of up £3,100 each month. At the year end this might be classified as a dividend, and in your hands that will be liable to 8.75% income tax. So, each time you take £3,100 put aside £272 in a personal tax reserve and don’t touch it!
If you have more profit and can tolerate higher rates of income tax, then you can move up to the next band. Your secondary drawings should not exceed £4,186 per month and you may be liable to 33.75% income tax on that. For each £4,186 put aside £1,413.
Having done all of the above, then you have reached the annual threshold for abatement on incomes above £100,000. If you want more drawings and want to pay 62% in personal taxes, then for every extra £1,000 that you take, set aside £620 in your personal tax reserve.
For an independent view of this strategy have a look at this Unbiased report.
At the year end, your accountant can help you establish how much of the drawings might be described correctly as dividends. The actual distributable profit for the year can only be calculated when the year end accounts are done.
Find out more about dividend vouchers.