Can I Pay Myself a Salary as a Director? (UK 2026 Rules Explained)

If you run your own limited company, you don’t get paid automatically like a traditional employee. You get to choose how you’re paid — usually a mix of salary and dividends. That freedom is great, but it also leads to the same question every year:

Can I pay myself a salary as a director, and how much should it be?

The short answer is yes, you absolutely can pay yourself a salary. In fact, it’s usually a key part of tax-efficient planning. With the 2026 tax rules now in place, here’s what directors need to know.

Why paying a salary matters

It can be tempting to avoid salary entirely and just take dividends. Some directors try it, but it almost always costs more in the long run. A salary counts toward your state pension and future benefits, helps you appear more reliable to mortgage lenders, and also reduces your corporation tax bill because the cost is deductible for the company.

Dividends are often taxed more favourably, but they don’t count as earnings, and they don’t reduce your corporation tax. That’s why almost all directors take a small, strategic salary first, and then use dividends for anything on top.

So how much salary should a director take in 2026?

For most small company directors with no other employment, the most tax-efficient salary this year is £12,570 per year — the same as the personal allowance. At this level, you pay no income tax on your salary, you build qualifying years for your state pension, and your company benefits from corporation tax savings because the salary is treated as an expense.

In many cases, you also avoid employer’s National Insurance altogether, provided the company qualifies for the Employment Allowance. If it doesn’t — which is common for one-director companies — there may be a small amount of employer’s NI to pay. Even so, the overall tax saving usually means that £12,570 still works out as the most efficient level.

What about the rest of your income?

Once your salary is sorted, anything you take after that usually comes out as dividends. These are taxed at lower rates than salary, even with the rate increases this year. Think of your salary as the foundation — it shouldn’t be too big, but it likely shouldn’t be zero.

When the ideal salary might be different

The recommendation above applies to many small limited companies, but there are situations where the best salary can change. If you earn income elsewhere — for example, through employment or rental properties — or if you run the business jointly with a spouse or partner, the strategy may need adjusting. Likewise, if the company is making a loss or isn’t yet profitable, if you’re using salary sacrifice to make pension contributions, or if your work is caught by IR35 rules, the optimal approach can look different.

At higher income levels, the picture changes slightly again. Once directors are earning above £100,000, especially when pension contributions are being made through salary sacrifice, a higher salary can become more efficient because it reduces Corporation Tax and avoids some personal tax through pension deductions. This doesn’t usually mean reverting to a full salary for spending — it’s more about using salary to fund pensions in the most tax-efficient way.

The bottom line

Yes — you can pay yourself a salary as a director, and you probably should. In 2026, a salary around £12,570, topped up with dividends, remains the most tax-efficient setup for many limited company owners. It protects your future benefits, reduces corporation tax, and can make you look more reliable to lenders — all while keeping your personal tax bill low.

Want clarity for your situation?

Every director’s circumstances are slightly different, and small tweaks can create surprisingly big tax savings. If you’d like us to review your salary and dividend mix, we’ll explain exactly what works best for you in plain English.

Ready to get it set up properly? Let’s chat.