Dividend or Salary: How to Optimise Your Director’s Income in 2025 – Complete Guide for UK LTD Directors
Introduction – The Dividend or Salary Question Every Director Faces
The dividend or salary decision is one of the most important choices you’ll make as an LTD company director in the United Kingdom. Should you take money out of your company as dividends or as salary? This dividend or salary question isn’t just technical – it’s about potentially saving thousands of pounds in tax every year.
Quick Answer: For most LTD directors choosing between dividend or salary in 2025, the optimal combination is: low salary (between £5,000-£12,570) plus dividends. This dividend or salary mix minimises National Insurance contributions whilst maximising net income. The Autumn Budget 2024 SIGNIFICANTLY changed the dividend or salary calculation!
In this dividend or salary guide, you’ll learn:
- How National Insurance rules changed the dividend or salary calculation in 2025
- How much tax and NI you can save with the right dividend or salary strategy
- The exact dividend or salary calculations for the 2025-26 tax year with NEW rates
- When you should still choose salary over dividend
- What mistakes to avoid with your dividend or salary decision
- Concrete dividend or salary examples at different income levels
- How to optimise your personal allowance with dividend or salary combinations
You know what I mean? When you first set up your company, nobody properly explained how important the dividend or salary decision is. Most new LTD owners simply pay themselves a salary because that’s what they know. But that’s the most expensive way to take money out of your business.
Let’s be honest: the British tax system is complicated. And in 2025, the dividend or salary calculation got even more complex because the Autumn Budget 2024 brought major changes to National Insurance.
IMPORTANT! 2025-26 Changes Affecting Your Dividend or Salary Decision
The Autumn Budget 2024 Impact on Dividend or Salary Strategy
The October 2024 Autumn Budget brought three massive changes affecting EVERY LTD director’s dividend or salary decision:
1. Employer’s NI rate increase: 13.8% → 15% That’s a 1.2 percentage point increase affecting your salary costs. Doesn’t sound like much, but it’s several hundred pounds extra cost per year for your company, making dividends even more attractive in the dividend or salary comparison.
2. Employer’s NI threshold reduction: £9,100 → £5,000 This is HUGE for your dividend or salary strategy! The threshold almost halved. This means Employer’s NI payments start at a much lower salary level, changing the optimal dividend or salary mix.
3. Employment Allowance increase: £5,000 → £10,500 This is the good news for your dividend or salary planning! Small businesses can claim more NI relief. And the £100,000 limit has been removed!
A colleague told me that when she saw the Budget announcement, she was halfway through her new tax year dividend or salary planning. She had to recalculate everything. Yes, the dividend or salary decision changed that much!
Understanding the Dividend or Salary Question: What’s the Difference?
Salary – The Traditional Route in the Dividend or Salary Choice
When considering dividend or salary, salary is what you know from traditional employment. You pay yourself as a company owner. You must deduct Income Tax and National Insurance (both Employee’s NI and Employer’s NI).
I remember when my first client asked about the dividend or salary decision: “But I’m my own boss, why do I have to pay NI?” Well, because in HMRC’s eyes, you’re both an employee and an employer. Yes, double role, double burden – which is why many choose dividends in the dividend or salary debate.
Key characteristics of salary in the 2025-26 dividend or salary comparison:
- Appears on your Self Assessment tax return
- Employee’s National Insurance: 8% (above £12,570) – Reduced in 2024!
- Employer’s National Insurance: 15% (above £5,000) – Increased in 2025!
- The company can claim it as an expense (reduces Corporation Tax)
- Counts towards building your State Pension
- Qualifies you for certain tax reliefs
Dividend – The Tax-Efficient Alternative in Dividend or Salary Debate
In the dividend or salary question, dividends are amounts paid from the company’s profits. You can only pay dividends if the company has sufficient profit. Here’s the trick in the dividend or salary comparison: you don’t pay any National Insurance on dividends.
One of our clients told me that when she understood the dividend or salary difference, she felt she’d been throwing money out the window for years. According to 2025-26 figures, choosing the right dividend or salary mix saves approximately £3,500-£6,000 in NI annually.
Key characteristics of dividends in the 2025-26 dividend or salary analysis:
- No National Insurance (neither Employee’s nor Employer’s)
- £500 tax-free Dividend Allowance in 2025-26 (was £1,000 until 2024!)
- Special dividend tax rates (8.75%, 33.75%, 39.35%)
- Doesn’t count as an expense for the company
- Doesn’t build your State Pension
- Requires proper paperwork (dividend voucher, minutes)
Key Takeaways on Dividend or Salary:
- Salary became MORE expensive in 2025 due to Employer’s NI changes
- Dividends are more tax-efficient in the dividend or salary comparison
- The combination of dividend and salary gives the best result
- You need to rethink your dividend or salary strategy due to new rules!
The Numbers That Really Matter in Your Dividend or Salary Decision – 2025-26 Tax Year
Let’s look at the concrete numbers for your dividend or salary calculation. Pay attention here, because this section really pays off for your dividend or salary planning, and everything’s different due to the changes!
Personal Allowance – Critical for Dividend or Salary Planning
In 2025-26, the Personal Allowance is £12,570. This is crucial for your dividend or salary strategy because you don’t pay Income Tax on your first £12,570 of income. But watch out in your dividend or salary planning! This applies to all income types combined (salary + dividends).
National Insurance Thresholds for Dividend or Salary Calculations 2025-26
Employee’s National Insurance (affects salary in dividend or salary mix):
- £0-£12,570: 0%
- £12,570-£50,270: 8% (was 12%!)
- Above £50,270: 2%
This is a big change for your dividend or salary calculation! The government reduced it from 12% to 10%, then to 8% in spring 2024!
Employer’s National Insurance (crucial for dividend or salary decisions):
- £0-£5,000: 0% (was £9,100!)
- Above £5,000: 15% (was 13.8%!)
Insider tip on dividend or salary: The Autumn Budget 2024 completely changed the optimal dividend or salary mix. The old dividend or salary strategies don’t work anymore! Many accountants are still using the old figures for dividend or salary calculations – be careful!
Dividend Tax Rates for Dividend or Salary Planning 2025-26
When calculating your dividend or salary mix, remember these dividend rates:
- First £500: 0% (Dividend Allowance) – HALVED!
- Basic rate (£12,570-£50,270): 8.75%
- Higher rate (£50,270-£125,140): 33.75%
- Additional rate (above £125,140): 39.35%
Key Takeaways for Your Dividend or Salary Strategy:
- Personal Allowance is £12,570, use it fully in your dividend or salary planning
- Employer’s NI threshold DRASTICALLY reduced to £5,000 – changes dividend or salary optimal mix!
- Employee’s NI rate dropped to 8% (makes salary less expensive in dividend or salary comparison)
- Dividend Allowance is only £500 in 2025-26 (affects your dividend or salary calculation)
The 3 Most Common Dividend or Salary Strategies with NEW Numbers
Strategy 1: Minimum Salary + Maximum Dividends (Most Popular Dividend or Salary Approach)
This is the most popular dividend or salary strategy among LTD directors. The key to this dividend or salary approach: pay yourself a low salary and take the rest as dividends.
Optimal salary levels for dividend or salary strategy in 2025-26:
- £5,000/year (£417/month) – Below the NEW Employer’s NI threshold, ideal for dividend or salary optimization
- £6,500/year (£542/month) – State Pension minimum, balanced dividend or salary approach
- £12,570/year (£1,047/month) – Full use of Personal Allowance in dividend or salary mix
I know you’re wondering which dividend or salary combination is better. Let’s look at concrete dividend or salary examples with the NEW NUMBERS!
Example 1: £40,000 total income – NEW dividend or salary calculation for 2025-26
Option A: £5,000 salary + £35,000 dividend (NEW optimal dividend or salary mix)
- Employee’s NI on salary: £0 (below £12,570)
- Employer’s NI: £0 (right at the threshold)
- Dividend tax: (£35,000 – £500) x 8.75% = £3,019
- Net income: £36,981
- This dividend or salary strategy saves maximum on NI!
Option B: £12,570 salary + £27,430 dividend (alternative dividend or salary approach)
- Employee’s NI on salary: approx. £0 (just at the threshold)
- Employer’s NI: (£12,570 – £5,000) x 15% = £1,135
- Dividend tax: (£27,430 – £500) x 8.75% = £2,356
- Net income: approx. £35,479 (you lost £1,135 in Employer’s NI!)
- Difference: £1,502 LESS than optimal dividend or salary mix!
See the difference in the dividend or salary comparison? With the NEW rules, the £5,000 salary dividend or salary combination is MUCH BETTER! This is one of the biggest impacts of the Autumn Budget 2024 on dividend or salary decisions!
Example 2: £60,000 total income – dividend or salary optimization
Option A: £5,000 salary + £55,000 dividend (recommended dividend or salary strategy)
- Employee’s NI: £0
- Employer’s NI: £0
- Dividend tax: (£55,000 – £500) x 8.75% = £4,769
- Net income: £55,231
- This dividend or salary mix maximizes your take-home pay!
Option B: £12,570 salary + £47,430 dividend (less optimal dividend or salary approach)
- Employee’s NI: £0
- Employer’s NI: (£12,570 – £5,000) x 15% = £1,135
- Dividend tax: (£47,430 – £500) x 8.75% = £4,106
- Net income: £53,759
- Difference: £1,472 LESS with this dividend or salary combination!
The pattern is clear in these dividend or salary examples: with the new rules, the £5,000 salary dividend or salary strategy is optimal, IF you don’t care about State Pension!
But What About State Pension in Your Dividend or Salary Decision?
Here comes the difficult part of the dividend or salary question. If you pay yourself £5,000 salary in your dividend or salary mix, you DON’T build State Pension!
State Pension minimum affecting dividend or salary decisions in 2025-26: £6,500/year (£125/week)
If you’re thinking long-term in your dividend or salary planning, it’s worth taking at least £6,500 as salary.
Example 3: £40,000 income with State Pension-friendly dividend or salary strategy
- £6,500 salary + £33,500 dividend
- Employee’s NI: £0
- Employer’s NI: (£6,500 – £5,000) x 15% = £225
- Dividend tax: (£33,500 – £500) x 8.75% = £2,888
- Net income: £36,887
- Extra cost for State Pension in this dividend or salary mix: £94/year
In my opinion, this dividend or salary approach is worth it! For £94 per year in your dividend or salary strategy, you get a qualifying year, which could later become £11,973/year (2025-26 full State Pension).
Strategy 2: Higher Salary Over Dividend in Certain Situations
The dividend or salary question doesn’t always favour dividends. Sometimes you really should choose salary over dividend. The dividend or salary decision isn’t one-size-fits-all.
When to choose salary over dividend in your dividend or salary strategy:
- Mortgage or loan application: Banks like regular salary in the dividend or salary assessment. Dividends can be variable.
- Building State Pension: Minimum £6,500/year salary needed, affecting your dividend or salary planning.
- Company pension contributions: You can contribute to a pension from salary, relevant to your dividend or salary decision.
- Maternity/Paternity pay: Statutory pay is calculated based on salary, not dividend or salary total.
- Company borrowing: If the company plans to take out a loan, your dividend or salary split matters to lenders.
One of our clients told me that when planning his mortgage, his dividend or salary mix became crucial. The mortgage advisor only accepted his salary as income. They deemed dividends too risky in the dividend or salary evaluation. He ended up having to pay himself a £30,000 salary for 6 months, completely changing his dividend or salary strategy.
Strategy 3: Income Splitting (Family Dividend or Salary Approach)
If your spouse or partner is also a shareholder, you can use income splitting in your dividend or salary planning. This family dividend or salary strategy can further reduce your tax burden.
Example 4: £80,000 total income, married couple – family dividend or salary strategy
Traditional dividend or salary method (1 director):
- £5,000 salary + £75,000 dividend
- Employer’s NI: £0
- Dividend tax: (£75,000 – £500) x 8.75% = £6,519
- Total net: £73,481
Income splitting dividend or salary approach (2 shareholders, each £40,000):
- Each £5,000 salary (total £10,000)
- Each £35,000 dividend (total £70,000)
- Total Employer’s NI: £0
- Total dividend tax: 2 x £3,019 = £6,038
- Total net: £73,962
- Saving with this dividend or salary strategy: £481/year
Warning about this dividend or salary approach! HMRC scrutinises such dividend or salary structures. Your spouse must be a genuine shareholder, and the dividend or salary split must be realistic.
Key Takeaways on Dividend or Salary Strategies:
- With NEW rules, £5,000 salary + dividend became optimal for dividend or salary mix
- Consider £6,500 salary for State Pension in your dividend or salary planning
- Sometimes salary beats dividend in the dividend or salary question (mortgage, pension)
- Family income splitting works in dividend or salary optimization
Common Mistakes in Dividend or Salary Decisions That Cost You Money
Mistake 1: Missing Proper Paperwork for Dividend or Salary
Whether choosing dividend or salary, dividends aren’t simply “taking money out” of the company. Your dividend or salary strategy requires official documentation for dividends.
Required documents for dividend (not salary) in your dividend or salary approach:
- Board Minutes
- Dividend Voucher
- Proper accounting entries
- Updated Share Register
Listen up about your dividend or salary documentation: HMRC asks for these first during an inspection. If they’re missing from your dividend or salary records, they could reclassify your dividends as salary. That means additional tax and penalties, completely undermining your dividend or salary strategy.
Mistake 2: Paying Dividends Without Profit (Breaking Dividend or Salary Rules)
In the dividend or salary question, you can only pay dividends if the company has sufficient retained profit. If there’s no profit but you still pay dividends in your dividend or salary mix, that’s an “illegal dividend”.
What happens if you’ve paid an illegal dividend in your dividend or salary strategy? You must repay it to the company, and you’re personally liable for it. Serious stuff – your dividend or salary planning must respect this rule.
Mistake 3: Losing Your Personal Allowance (Affects Both Dividend or Salary)
If your total income (in your dividend or salary mix) exceeds £100,000, you gradually lose your Personal Allowance. Between £100,000 and £125,140, you lose £1 of Personal Allowance for every £2 of additional income – whether from dividend or salary.
Example 5: £120,000 total income in dividend or salary combination
- Personal Allowance reduction: (£120,000 – £100,000) / 2 = £10,000
- Remaining allowance: £12,570 – £10,000 = £2,570
- Effective tax rate in this dividend or salary band: 60%!
Let’s be honest about this dividend or salary trap, that’s brutal. That’s why many try to keep their dividend or salary total below £100,000, or reduce it with pension contributions.
Mistake 4: Not Knowing the NEW 2025-26 Rules for Dividend or Salary!
This is the BIGGEST mistake in dividend or salary planning! Many people are still using old numbers for their dividend or salary calculations. If your accountant still suggests a £9,100 salary in your dividend or salary mix “because that’s the Employer’s NI threshold”, tell them immediately to UPDATE their dividend or salary advice!
The NEW threshold affecting your dividend or salary strategy is £5,000! Anyone paying themselves £9,100 in their dividend or salary mix is unnecessarily spending company money on Employer’s NI:
- (£9,100 – £5,000) x 15% = £615 unnecessary Employer’s NI per year!
This completely undermines your dividend or salary optimization!
Mistake 5: Neglecting State Pension in Dividend or Salary Planning
If you pay yourself too low a salary in your dividend or salary strategy, you don’t build State Pension. Long-term, this affects the true value of your dividend or salary decisions.
Minimum requirement affecting dividend or salary planning in 2025-26:
- £6,500/year salary needed for a qualifying year in your dividend or salary mix
- 35 qualifying years needed for full State Pension
- Full State Pension in 2025-26: approx. £11,973/year (£230.25/week)
Personal advice on dividend or salary: I recommend maintaining at least the £6,500 level in your dividend or salary strategy. Long-term security is worth more than the annual £225 Employer’s NI saving in your dividend or salary calculation.
Key Takeaways on Dividend or Salary Mistakes:
- Always prepare dividend vouchers (not needed for salary in dividend or salary mix)
- Only pay dividends from profits (key rule in dividend or salary question)
- Watch the £100,000 threshold in your dividend or salary total
- UPDATE your dividend or salary strategy to NEW 2025-26 rules!
- Don’t forget State Pension minimum in your dividend or salary planning
Practical Dividend or Salary Examples at Different Income Levels – NEW NUMBERS
Low Income: £25,000/year Dividend or Salary Optimization
Optimal dividend or salary structure for 2025-26:
- Salary: £5,000/year
- Dividend: £20,000/year
- Employee’s NI: £0
- Employer’s NI: £0
- Dividend tax: (£20,000 – £500) x 8.75% = £1,706
- Net: £23,294
- Effective tax rate with this dividend or salary mix: 6.8%
This is the level where the dividend or salary strategy really pays off. NI savings in the dividend or salary comparison are proportionally highest here.
Comparison with salary-only (no dividend) approach:
- £25,000 salary (no dividend or salary split)
- Employee’s NI: (£25,000 – £12,570) x 8% = £994
- Employer’s NI: (£25,000 – £5,000) x 15% = £3,000
- Net: £21,006
- Difference: £2,288 MORE with dividend or salary strategy!
Medium Income: £50,000/year Dividend or Salary Strategy
Optimal dividend or salary structure for 2025-26:
- Salary: £6,500/year (State Pension!)
- Dividend: £43,500/year
- Employee’s NI: £0
- Employer’s NI: (£6,500 – £5,000) x 15% = £225
- Dividend tax: (£43,500 – £500) x 8.75% = £3,763
- Net: £46,012
- Effective tax rate with this dividend or salary combination: 8.0%
Salary-only comparison (ignoring dividend or salary optimization):
- £50,000 salary (no dividend or salary mix)
- Employee’s NI: (£50,000 – £12,570) x 8% = £2,994
- Employer’s NI: (£50,000 – £5,000) x 15% = £6,750
- Net: £37,256
- Difference: £8,756 MORE with dividend or salary approach!
Yes, you read that right about this dividend or salary comparison. EIGHT THOUSAND SEVEN HUNDRED AND FIFTY-SIX pounds difference with proper dividend or salary planning!
High Income: £80,000/year Dividend or Salary Planning
Optimal dividend or salary structure for 2025-26:
- Salary: £12,570/year (Personal Allowance max)
- Dividend: £67,430/year
- Employee’s NI: £0
- Employer’s NI: (£12,570 – £5,000) x 15% = £1,135
- Dividend tax: (£67,430 – £500) x 8.75% = £5,856
- Net: £73,009
- Effective tax rate with this dividend or salary strategy: 8.7%
Watch out in your dividend or salary planning! You’ll hit the higher rate dividend tax if you increase further in your dividend or salary mix.
Very High Income: £100,000/year Dividend or Salary Considerations
Warning zone for dividend or salary decisions! Consider pension contributions in your dividend or salary strategy here.
Option 1: Traditional dividend or salary approach
- Salary: £12,570
- Dividend: £87,430
- Employer’s NI: £1,135
- Dividend tax: £7,606
- Effective tax rate with this dividend or salary mix: approx. 8.7%
Option 2: Pension-enhanced dividend or salary strategy
- Salary: £50,000 (£30,000 into company pension)
- Dividend: £50,000
- Pension: £30,000 (tax-free, also reduces Corporation Tax!)
- Employer’s NI: £6,750
- Dividend tax: £4,331
- Effective tax rate with this dividend or salary combination: approx. 11.1%
Pension contributions affect your dividend or salary optimization by reducing taxable income, so you get back part of your Personal Allowance.
Key Takeaways on Dividend or Salary Examples:
- At £25,000, dividend or salary strategy gives 6-7% effective tax rate
- At £50,000, proper dividend or salary planning saves over £8,000 annually!
- Above £80,000, dividend or salary mix hits higher rate dividend tax
- Above £100,000, pension contributions enhance dividend or salary strategy
Dividend or Salary Comparison Table 2025-26
| Aspect | Salary | Dividend | Optimal Dividend or Salary |
|---|---|---|---|
| Employee’s NI | 8% (above £12,570) | 0% | Favour dividend |
| Employer’s NI | 15% (above £5,000) | 0% | Favour dividend |
| Effective cost | MUCH higher! | Lower | Mix both |
| 2025-26 change | Got MORE expensive! | Unchanged | Rebalance mix |
| Corporation Tax reduction | Yes (expense) | No | Consider in planning |
| State Pension building | Yes (min. £6,500) | No | Need some salary |
| Tax rates | 0%-45% | 0%-39.35% | Both have merit |
| Minimum income | None | Profit required | Check profits first |
| Administration | PAYE, RTI | Voucher, Minutes | Both need admin |
| Mortgage acceptance | Easier | Harder | Use salary for mortgage |
| Pension contribution | Possible | No | Use salary for pension |
| Flexibility | Fixed, monthly | Variable, flexible | Mix gives flexibility |
| 2025 saving potential | 0% | Up to 20%+! | Optimize mix |
What Should You Do Now? Step-by-Step Dividend or Salary Guide
Step 1: Check Your Current Dividend or Salary Strategy
Review your existing dividend or salary approach:
- What’s your current dividend or salary split?
- Is your dividend or salary mix based on NEW 2025-26 rules?
- Are you optimizing your dividend or salary combination?
Ask your accountant about your dividend or salary strategy:
- “What’s the Employer’s NI threshold for 2025-26?” (Correct answer: £5,000)
- “What’s the optimal dividend or salary mix for my income level?”
- “How did the Autumn Budget 2024 affect my dividend or salary planning?”
If they don’t know the NEW rules affecting dividend or salary decisions, CHANGE ACCOUNTANTS! Your dividend or salary optimization is too important for outdated advice.
Step 2: Recalculate Your Dividend or Salary Strategy
Look at your 2024 dividend or salary data. How much did you unnecessarily pay in Employer’s NI because your dividend or salary mix was using the old £9,100 threshold?
Calculate your optimal dividend or salary combination for 2025-26 using the NEW rules.
Step 3: Determine Your 2025-26 Dividend or Salary Goal
When planning your dividend or salary strategy, how much income will you need? Consider these factors in your dividend or salary decision:
- Buying a house? (need higher salary in dividend or salary mix)
- Building State Pension? (min. £6,500 salary in dividend or salary approach)
- Maximise net income? (£5,000 salary + dividends in dividend or salary optimization)
Step 4: Set Up the NEW Optimal Dividend or Salary Structure
For most LTD directors, the optimal dividend or salary strategy in 2025-26:
- Default dividend or salary mix: £5,000/year salary (if State Pension not important now)
- State Pension-friendly dividend or salary approach: £6,500/year salary (recommended!)
- Mortgage-focused dividend or salary strategy: £30,000-£40,000 salary (for 6 months)
Step 5: Document Your Dividends Properly (Critical for Dividend or Salary Compliance)
Your dividend or salary strategy requires proper documentation for the dividend portion:
Before every dividend payment in your dividend or salary mix:
- Prepare Board Minutes
- Issue Dividend Voucher
- Record in accounting books
- Store securely (min. 6 years)
Proper documentation protects your dividend or salary optimization from HMRC challenges.
Step 6: Review Your Dividend or Salary Strategy Quarterly
Your dividend or salary situation can change during the year. Check your dividend or salary approach quarterly:
- Profit development (affects dividend availability in dividend or salary mix)
- Dividend payment capacity
- Tax planning for dividend or salary
- NEW rules affecting dividend or salary decisions (HMRC often makes changes!)
Insider tip on dividend or salary: AWOC Accounting continuously monitors rule changes affecting dividend or salary planning and notifies clients. Don’t let your dividend or salary strategy fall behind!
Key Takeaways on Your Dividend or Salary Action Plan:
- Check IMMEDIATELY that your dividend or salary calculations use NEW rules!
- £5,000 or £6,500 salary recommended for most dividend or salary strategies in 2025-26
- Document dividends properly in your dividend or salary approach
- Regularly review your dividend or salary optimization strategy
FAQ – Frequently Asked Questions About Dividend or Salary
Can I pay dividends anytime in my dividend or salary mix?
Not exactly in the dividend or salary question. You can only pay dividends if the company has sufficient retained profit. You must decide at a board meeting and document it. This is a key difference between dividend or salary – dividends are typically paid annually or quarterly, whilst salary is monthly.
What happens if I pay myself £9,100 salary in my 2025-26 dividend or salary strategy?
You’re unnecessarily spending company money with that dividend or salary mix! The NEW Employer’s NI threshold affecting your dividend or salary calculation is £5,000. If you pay £9,100 in your dividend or salary approach:
- Employer’s NI: (£9,100 – £5,000) x 15% = £615 unnecessary cost!
Better optimize your dividend or salary strategy – take that amount as dividends or leave it in the company!
How does HMRC check my dividend or salary arrangements?
HMRC conducts random inspections of dividend or salary structures and particularly monitors companies with high dividend/low salary ratios in their dividend or salary mix. That’s why proper documentation is important for your dividend or salary strategy. If everything’s in order with your dividend or salary records, there’s no problem.
Can I change my dividend or salary strategy during the year?
Yes, you can adjust your dividend or salary approach. Your salary portion of the dividend or salary mix is usually fixed, but you can pay dividends flexibly. If you decide mid-year that you need a mortgage, simply increase your salary in your dividend or salary strategy from next month.
What if my accountant doesn’t know the NEW dividend or salary rules?
Unfortunately, this is common with dividend or salary planning. Many small business accountants missed the Autumn Budget 2024 changes affecting dividend or salary decisions. You have two options for your dividend or salary strategy:
- Send them this dividend or salary guide
- Switch to a professional accountant who’s up to date on dividend or salary optimization
The AWOC Accounting team is guaranteed up to date on dividend or salary rules – it’s their profession!
Conclusion – Optimize Your Dividend or Salary Strategy for 2025
You can now see that the dividend or salary question completely changed in 2025. The Autumn Budget 2024 redrew the map for dividend or salary planning.
Key lessons about dividend or salary:
- The 2025-26 tax year brought MASSIVE changes to dividend or salary calculations
- £5,000 salary became the new optimum in dividend or salary mix (was £9,100)
- Employer’s NI rate increased to 15% (affects dividend or salary comparison)
- Thousands of pounds in annual savings possible with right dividend or salary strategy
- Proper documentation is essential for dividend or salary compliance
- Every dividend or salary situation is unique, your personal circumstances matter
Let’s be honest about dividend or salary: if you’re planning your 2025 dividend or salary strategy with 2024 numbers, you’re LOSING MONEY. Everything changed in the dividend or salary calculation because of the Autumn Budget.
Don’t Miss Out on Dividend or Salary Optimization Savings!
If you’re unsure exactly what the optimal dividend or salary combination would be for your situation under the NEW rules, or if you need help optimizing your dividend or salary strategy, contact us today! The AWOC Accounting team has helped business owners optimize their dividend or salary mix for years.
Request a free dividend or salary consultation where we:
- Review your current dividend or salary structure in light of NEW rules
- Calculate how much you lost in 2024 with old dividend or salary strategy
- Set up the NEW optimal 2025-26 dividend or salary combination
- Help prepare proper documentation for your dividend or salary approach
- Keep you continuously updated on all dividend or salary rule changes
Request a free dividend or salary consultation now and start ACTUALLY saving on taxes with proper dividend or salary optimization in 2025-26!
Remember about your dividend or salary decision: every month you wait costs you hundreds of pounds. Working with the old dividend or salary strategy in 2025 is like DELIBERATELY throwing money out the window.
Act today on your dividend or salary planning! Contact us today and we’ll show you exactly how much you can save with the right dividend or salary mix!
References and Sources
All information in this dividend or salary guide is based on official UK government sources and HMRC guidance current as of October 2025:
- HM Revenue & Customs (HMRC) Official Site – Tax on Dividends
https://www.gov.uk/tax-on-dividends - GOV.UK – National Insurance Rates and Categories
https://www.gov.uk/national-insurance-rates-letters - GOV.UK – Employer Rates and Thresholds 2025-26
https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2025-to-2026 - GOV.UK State Pension Information
https://www.gov.uk/new-state-pension - UK Government – Autumn Budget 2024: Changes to the Class 1 National Insurance Contributions Secondary Threshold
https://www.gov.uk/government/publications/changes-to-the-class-1-national-insurance-contributions-secondary-threshold-the-secondary-class-1-national-insurance-contributions-rate-and-the-empl/changes-to-the-class-1-national-insurance-contributions-secondary-threshold-the-secondary-class-1-national-insurance-contributions-rate-and-the-empl - HMRC Official Statistics: National Insurance Contributions
https://www.gov.uk/government/statistics/main-features-of-national-insurance-contributions - House of Commons Library: Direct Taxes – Rates and Allowances for 2025/26 (CBP-10237)
https://commonslibrary.parliament.uk/research-briefings/cbp-10237/ - State Pension Statistics: The New State Pension – What You’ll Get
https://www.gov.uk/new-state-pension/what-youll-get - Corporation Tax Rates: Guidance – Corporation Tax Rates and Allowances
https://www.gov.uk/government/publications/rates-and-allowances-corporation-tax/rates-and-allowances-corporation-tax
Disclaimer: Tax rules and rates are subject to change. While this dividend or salary guide is based on the latest available information at the time of publication (October 2025), we recommend consulting with a qualified accountant or tax advisor for advice specific to your circumstances. AWOC Accounting accepts no liability for decisions made based solely on this dividend or salary guide.
