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26/27 Personal Tax Thresholds

Please see further information below regarding tax thresholds for the financial year 6th April 26 - 5th April 27.

 

Personal Tax Thresholds

  • The tax-free personal allowance is £12,570 (this is restricted when income exceeds £100,000).

  • If you receive a salary from your company, this is likely to use up most or all of your personal allowance.

  • The basic rate tax threshold applies to the next £37,700 of income. Dividends taken within this band are subject to basic rate dividend tax of 10.75%, with the exception of the first £500 which utilises a tax-free dividend allowance.

  •  Dividends taken when your income exceeds the basic rate threshold (£50,270) will suffer higher rate dividend tax of 35.75%.

  • Dividends taken when your income exceeds the additional rate tax threshold (£125,140 total income) are subject to additional rate dividend tax of 39.35%.

  • There are slightly different bands and tax rates for Scottish residents, please get in touch with your accountant for bespoke tax planning.

💡 Should you adopt the most tax efficient drawings strategy for a single director company (£12,570 salary and dividend mix up to £50,270 of total income), you can expect a tax liability of £3,999. On this basis, £333.25 needs to be set aside each month to cover this personal tax liability. In your first year of trading, you will need to increase this to £5,998.50 to cover the first payment on account.

For companies that are eligible to claim the employment allowance, the above may not be the most tax efficient option for the 26/27 tax year. Please get in touch with your accountant to discuss this further.

Student Loan

Should you have a student loan, you will start to repay this via the self-assessment when your income exceeds the below thresholds:

£26,900 a year for Plan 1 – 9% repayment

£29,385 a year for Plan 2 – 9% repayment

£33,795 a year for Plan 4 – 9% repayment

£25,000 a year for Plan 5 – 9% repayment

£21,000 for Postgraduate Loans – 6% repayment

 

Personal Tax Savings Approach

✅ It is advised to make personal tax and student loan repayment savings as you withdraw dividends, in a separate personal savings account.

❌ It is not advised to leave personal tax savings within the company account, as the personal tax liability is for the individual rather than the company.

💡 For example, if you were withdrawing £500 of dividends within the basic rate tax band, £53.75 (10.75%) of this would be put aside in a separate personal tax savings account.

Tax planning

Tax on income is considered cumulatively from all sources, so if you have income outside of your limited company this will likely impact on the tax you pay on dividends taken from the company.

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This could be employment income, sole trader income, rental income, investment income and so on. Other factors such as child benefit or private pension contributions made personally can also have an impact on the tax bill. We would advise all clients, especially if they have income outside of the company, to get in touch with their accountant for a personalised drawings plan.