A worked example
The £250,000 is this year's taxable profit, after the owner's £12,570 salary, and has not yet been drawn. One owner, with no other income and no associated companies. For the pension route, the company pays the full £60,000 annual allowance, with no carry-forward, and the owner's threshold income stays under £200,000.
| 2027/28 and the year to 31 March 2028 | Before the Budget | After the Budget | Difference |
|---|---|---|---|
| A. Keep it in the company | |||
| Corporation tax on £250,000 at 25% (at the upper limit, so no marginal relief) | £62,500.00 | £62,500.00 | £0.00 |
| Cash kept in the company | £187,500.00 | £187,500.00 | £0.00 |
| B. Pay it all out as a dividend | |||
| Dividend after corporation tax | £187,500.00 | £187,500.00 | |
| Income tax on the £12,570 salary, now all at 20% (total income £200,070 is over £125,140, so no personal allowance) | £2,514.00 | £2,514.00 | |
| Dividend tax: £500 at 0%, £24,630 at 10.75%, £87,440 at 35.75%, £74,930 at 39.35% | £63,392.48 | £63,392.48 | |
| Total tax on the £250,000 (corporation tax plus the owner's extra tax) | £128,406.48 | £128,406.48 | £0.00 |
| Kept by the owner | £121,593.52 | £121,593.52 | £0.00 |
| C. £60,000 into the pension, the rest kept | |||
| Corporation tax on £190,000: £47,500 − 3/200 × £60,000 | £46,600.00 | £46,600.00 | £0.00 |
| In the pension (no income tax or National Insurance on it) | £60,000.00 | £60,000.00 | |
| Cash kept in the company | £143,400.00 | £143,400.00 | £0.00 |
One change touches the choice: from 6 April 2027 interest on savings held personally is taxed at 24%, 44% and 49%, 4 percentage points above today's 20%, 40% and 45%. Money paid out and then saved earns interest taxed at those rates; the rent and savings page shows what the rise costs.
When it takes effect
Nothing changes for corporation tax, dividends or pension contributions in 2027/28. The higher savings rates start on 6 April 2027. The rules on how company distributions to individual shareholders are taxed are being modernised from April 2028, with draft legislation in 2027.
Who it doesn't affect
An owner who takes profit as salary and dividends and has no personal savings income sees no change from the Budget in 2027/28.
Where this comes from
- Budget 2026: Overview of Tax Legislation and Rates (HMRC), Annex A, Corporation Tax rates: 25% and 19%, the £50,000 and £250,000 limits and the 3/200 marginal relief fraction for the financial year from April 2027
- Budget 2026 OOTLAR, Annex A: dividend rates 10.75%, 35.75% and 39.35% and the £500 allowance; the £12,570 personal allowance, withdrawn above £100,000; bands to £37,700 and £125,140; savings rates of 24%, 44% and 49% for 2027/28
- Budget 2026 OOTLAR, Annex A, Pensions tax relief: annual allowance £60,000, tapered where adjusted income is over £260,000, for 2026/27 and 2027/28
- Budget 2026 (HM Treasury), "Making fair choices on revenue raising": savings and property income rates up a further 2 percentage points from April 2027
- Budget 2026: Overview of Tax Legislation and Rates (HMRC), section 2.15: the distributions framework modernised from April 2028
- HMRC Pensions Tax Manual PTM043100: employer contributions are deducted in the period they are paid
- Corporation Tax marginal relief (HMRC Company Taxation Manual CTM03925)
- Pension annual allowance (GOV.UK): £60,000, tapered where threshold income is over £200,000 and adjusted income over £260,000
Every figure on this page comes from the Budget documents published on GOV.UK on , and was checked by Alan Davidson FCA. Last updated . It is general information, not advice on your own position.