Most tax-efficient way for shareholders

leep888

Hi everyone,

I’m looking for some guidance on the most tax-efficient way to remunerate the owners of our company for the 2026/27 tax year. I’ve recently become a director, and our shareholding is split as follows:

• Director A (Me): 35% shareholding

• Director B (Partner): 51% shareholding

• Shareholder C (Partner’s Wife): 14% shareholding (not a director, but works in the business)

Our goal is to ensure I can take home approximately £52,000 gross per year while minimizing the overall tax burden for both the individuals and the company.

We are currently considering two main options:

1.High Salary: Taking a flat salary of roughly £1,000/week for the directors.

2.Hybrid Approach: Taking a lower salary (e.g., £12,570 or £250/week) to utilize the Personal Allowance and National Insurance thresholds, with the remainder taken as dividends.

A few specific points I’m curious about:

• Pro-Rata Dividends: Since we have a 35/51/14 split, I understand dividends must be paid pro-rata. How does this impact the total "pot" the company needs to distribute if I want to hit my £52k target?

• Alphabet Shares: Is it worth implementing different share classes (A, B, and C) to allow us to vary dividend payments independently of our share percentages?

• Corporation Tax vs. Personal Tax: We’ve noticed that while high salaries reduce Corporation Tax, the National Insurance and Income Tax costs seem much higher. What is the current "sweet spot" for 2026/27?

For context, the company is healthy with significant retained earnings and 6 other employees.

Any advice on the best structure or things we should discuss with our accountant would be greatly appreciated!

Exodi

At the end you mention you have an accountant, so this is really something you should discuss with them. It is what you are paying them for after all.

Generally as corporation tax is lower than income tax, it's as you say, many choose to take a lower salary, either up to the LEL (currently £6,708 p/a) or commonly up the personal allowance of £12,570 (which works out more tax efficient).

Then the rest as dividends.

Regarding your pro-rata dividends, you just need to sit there with a spreadsheet and work it out. If you pay £100 of dividends, you would split it £35/£51/£14.

If you want to take out £52,000 gross and decide to pay yourself the personal allowance of £12,570, you'd need a dividend payment of £39,430.

As you receive 35%, this would be a total company dividend of £112,657 (39430/0.35), with director B then receiving £57,455 and shareholder C receiving £15,772.

It's also worth thinking about levying salary sacrifice contributions into your pensions - though I'm not sure what your pension situation is. Assuming your pensions aren't stuffed full, this is usually the best option.