A worked example
Two director-shareholders, each on a £12,570 salary and £60,000 of dividends in 2027/28, with no other income. The company's £200,000 profit is its taxable profit after the salaries and employer's National Insurance. Its Employment Allowance goes against its staff's National Insurance, so none is shown against the directors.
| Each director, 2027/28 | Before the Budget | After the Budget | Difference |
|---|---|---|---|
| Salary | £12,570.00 | £12,570.00 | |
| Income tax on the salary (covered by the £12,570 personal allowance) | £0.00 | £0.00 | £0.00 |
| Employee's National Insurance (primary threshold £12,570) | £0.00 | £0.00 | £0.00 |
| Dividends | £60,000.00 | £60,000.00 | |
| First £500 at 0% (dividend allowance) | £0.00 | £0.00 | |
| Next £37,200 at 10.75% | £3,999.00 | £3,999.00 | |
| Last £22,300 at 35.75% | £7,972.25 | £7,972.25 | |
| Dividend tax | £11,971.25 | £11,971.25 | £0.00 |
| Kept: £12,570 + £60,000 − £11,971.25 | £60,598.75 | £60,598.75 | £0.00 |
| The company, year to 31 March 2028 | Before the Budget | After the Budget | Difference |
|---|---|---|---|
| Employer's National Insurance on the two salaries: 2 × (£12,570 − £5,000) × 15% | £2,271.00 | £2,271.00 | £0.00 |
| Corporation tax on £200,000: £50,000 − 3/200 × (£250,000 − £200,000) | £49,250.00 | £49,250.00 | £0.00 |
What did change on personal income: from 6 April 2027 interest on savings is taxed at 24%, 44% and 49%, and rental income at 24%, 44% and 49% in England, Wales and Northern Ireland. That is 4 percentage points above today's 20%, 40% and 45%. A director with savings or rental income outside the company pays more on that income; salary and dividends are taxed as before. The rent and savings page works through a director who lets the premises to the company.
When it takes effect
Nothing changes for salary or dividends in 2027/28. The higher savings and property rates start on 6 April 2027. Separately, the rules on how distributions from companies to individual shareholders are taxed are being modernised from April 2028, with draft legislation to be consulted on in 2027; the government says capital treatment for genuine changes in ownership, including families passing down a business, is protected.
Who it doesn't affect
Directors whose income is salary and dividends: the Budget left dividend tax, income tax on earnings and National Insurance where they were for 2027/28. Scottish taxpayers pay Scottish rates on their salary, as before; dividend tax is the same across the UK.
Also announced
From April 2029, Self Assessment taxpayers who make payments on account will pay their tax in smaller, more regular amounts through the year, collected automatically (for example by Direct Debit), instead of the two payments on account in January and July. Those with enough PAYE income will be able to choose to pay through PAYE instead. For a director who pays dividend tax through Self Assessment payments on account, that means more regular payments through the year from April 2029; the tax itself does not change. How often the payments will be and how the move will work are not yet known: the government says it will set out the detail next year. The documents do not say whether the £1,000 threshold for making payments on account will change.
Where this comes from
- Budget 2026: Overview of Tax Legislation and Rates (HMRC), Annex A: income tax bands (basic rate to £37,700, higher to £125,140), the £12,570 personal allowance and £100,000 income limit, dividend rates 10.75%, 35.75% and 39.35%, the £500 dividend allowance, and the savings and property rates, for 2026/27 and 2027/28
- Budget 2026 OOTLAR, Annex A, National Insurance contributions: primary threshold £242 a week, secondary threshold £96 a week, employer's rate 15%, for 2027/28
- Budget 2026 OOTLAR, 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 (HM Treasury), "Making fair choices on revenue raising": rates of tax on earnings unchanged; savings and property income rates up a further 2 percentage points from April 2027, on top of the 2 points set at Budget 2025
- Budget 2026: Overview of Tax Legislation and Rates (HMRC), section 1.1: savings rates of 24%, 44% and 49% from 6 April 2027; section 2.15: changes to the taxation of company distributions from April 2028
- Budget 2026 (HM Treasury), "A modern and fair tax system": the distributions framework, with capital treatment protected for genuine changes in ownership, draft legislation to be consulted on ahead of April 2028
- Corporation Tax marginal relief (HMRC Company Taxation Manual CTM03925): how the relief is worked out
- Budget 2026: Overview of Tax Legislation and Rates (HMRC), section 2.31, More Timely Payments for Self Assessment: from April 2029, taxpayers who make payments on account make more regular in-year payments, automated, with the choice of paying through PAYE where eligible
- Budget 2026 (HM Treasury), "A modern and fair tax system": from April 2029, smaller, more regular payments towards the tax bill through the year; and policy decisions, "Measures to close the tax gap and modernise the tax system"
- Timely Payments in Income Tax Self Assessment: summary of responses (HMRC, Budget 2026), section 4 (payments on account now: January in the tax year and July after it, for liabilities over £1,000) and section 6 (automated in-year payments by default from April 2029; frequency, timing and transition to be set out next year)
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.