If you are a director of a limited company, one of the most common questions is: how much dividend can I take?
The answer depends on your company’s available profits, your salary, your other income and the current tax rates.
Can You Pay Yourself Dividends?
Yes. A limited company can pay dividends to its shareholders, but only from profits available after Corporation Tax. Dividends cannot be paid if the company does not have sufficient retained profits.
Salary or Dividends?
Many directors choose a combination of salary and dividends because it can be more tax-efficient than taking salary alone. The most suitable balance depends on your individual circumstances and should be reviewed each tax year.
What Is the Most Tax-Efficient Dividend for a Sole Director in 2026/27?
For many sole directors, a common tax planning strategy is to take a salary up to the Personal Allowance and then withdraw dividends within the basic rate tax band, provided the company has sufficient distributable profits.
| Allowance / Threshold | Amount |
|---|---|
| Personal Allowance | £12,570 |
| Basic Rate Band | £37,700 |
| Dividend Allowance | £500 |
Many directors with no other taxable income can typically receive:
- Salary: £12,570
- Dividends: up to approximately £37,700
This keeps total taxable income within the basic rate band. The first £500 of dividends falls within the dividend allowance, with dividends above that taxed at the basic dividend rate.
Please note: Dividends can only be paid from profits available after Corporation Tax. Before withdrawing dividends, make sure your company has sufficient retained profits and consider the personal tax implications.
We Can Help
Crown Tax Accountants can advise on the most tax-efficient way to extract profits from your company while ensuring you remain compliant with HMRC requirements.