If you run your own company, this personal tax guide for business owners highlights the main points to understand for the 2026/27 tax year and why remuneration planning matters.
For many owner-managed business owners, personal tax is not just about salary. It is also about dividends, savings income, rental income, pension contributions and the less obvious traps that appear once income starts to move through certain thresholds.
The overall tax cost can easily be higher than expected because the interaction between allowances, rate bands and adjusted net income is often not considered until a tax return is being prepared.
This article is not intended to be a full technical manual. It is a practical guide to the points most likely to matter if you run your own business and want to better understand how the personal tax system works in 2026/27.
Unless stated otherwise, this article is written with England, Wales and Northern Ireland in mind.
A personal tax guide for business owners starts with the basics
The main income tax bands
Personal allowance: up to £12,570
The personal allowance remains at £12,570 for the coming tax year. In simplest terms, your income up to this amount is tax-free. This is why many directors set salary at or around this level, often £1,047.50 per month, although the right figure depends on the wider remuneration plan.
Basic rate band: £12,571 – £50,270
The basic rate band limit is also unchanged, at £50,270. This means the next £37,700 of taxable income above the Personal Allowance is taxed at 20%.
Higher rate band: £50,271 – £125,140
The higher rate band has been frozen since 2021, bringing more individuals into higher-rate tax. Once income goes above the basic rate limit you are taxed at 40%.
Additional rate of tax: £125,141+
Once income exceeds £125,140 an individual is into the additional tax rate of 45%.
In practice, personal tax often becomes more complex when:
- income comes from more than one source
- dividends and savings sit on top of salary
- Child Benefit is in point
- pension contributions start to interact with adjusted net income
- income moves above £100,000
So while the rates themselves are straightforward, the planning around them often is not.
Adjusted Net Income is one of the numbers that matters most
If there is one concept many business owners should understand better, it is Adjusted Net Income.
Adjusted Net Income is broadly:
- total taxable income, including salary, benefits, dividends, property income and savings income
- less certain reliefs, such as Gift Aid and some pension contributions
It matters because adjusted net income is the figure that often determines whether:
- your Personal Allowance starts to reduce
- the High Income Child Benefit Charge applies
- pension taper rules need to be considered
For business owners, that makes it an especially important planning number. A director/shareholder taking a modest salary but larger dividends can still find themselves crossing thresholds that create extra tax friction.
Watch the £100,000 line
Once adjusted net income goes above £100,000, your Personal Allowance starts to reduce.
That reduction happens at a rate of £1 of allowance lost for every £2 of income above £100,000. Because the standard Personal Allowance is £12,570, it is fully lost once income reaches £125,140.
This matters because it creates an effective tax rate of around 60% on income that falls between £100,000 and £125,140.
For some, that does not mean the answer is “keep income down at all costs”. It means the answer is to plan properly:
- timing dividends more carefully
- reviewing timing and amounts of pension contributions and gift aid donations
- thinking ahead where a bonus, dividend or one-off event could push income through the line.
Thresholds that catch business owners out
Child Benefit for higher earners
If you or your partner receives Child Benefit, the High Income Child Benefit Charge (HICBC) becomes relevant.
For adjusted net income between £60,000 and £80,000, the charge claws back 1% of Child Benefit for every £200 of income above the threshold. At £80,000 or more, the charge equals the full Child Benefit amount.
That means this is not just an issue for very high earners. It can affect directors and business owners who are drawing a level of income that does not necessarily feel “high” once family costs are taken into account.
It is also one of the clearest examples of why adjusted net income matters more than just looking at salary alone.
Free childcare for working parents
(For the purposes of this article we assume that the taxpayer and their partner meet the requirements on earned income to qualify).
If you have a child, aged 9 months to 4 years old, you can get 30 hours per week of free childcare for 38 weeks of the year.
However, eligibility is lost if an individual or their partner’s adjusted net income exceeds £100k in a tax year.
This point is often missed in remuneration planning exercises and becomes a significant cost if childcare is no longer funded.
Pension allowances still matter, particularly once income increases
Pensions remain one of the main areas where personal tax planning and remuneration planning overlap.
For 2026/27:
- the standard annual allowance remains £60,000
- the Money Purchase Annual Allowance remains £10,000
- the tapered annual allowance applies where adjusted income exceeds £260,000 and the threshold income test is also met at over £200,000
- the taper reduces the annual allowance by £1 for every £2 of adjusted income above £260,000, down to a minimum of £10,000
For many owner-managed businesses, the key point is not whether the taper applies today. It is whether changes in salary, benefits, dividends, pension contributions or business performance could bring it into play later.
This is one of those areas where the interaction between company planning and personal tax can become more important as a business grows.
Dividends, savings and property income
Savings income
For 2026/27, the Personal Savings Allowance remains:
- £1,000 for basic rate taxpayers
- £500 for higher rate taxpayers
- £0 for additional rate taxpayers
This is the amount you can earn from savings (typically interest received) before paying your marginal rate of income tax (20%, 40% or 45%).
There is also still a starting rate for savings of up to £5,000, but it is only relevant where non-savings income is low. If your other income is £17,570 or more, you are not eligible for that starting rate.
One important point for 2026/27: although the government has announced higher savings tax rates, those changes are scheduled for 2027/28, not 6 April 2026. So for the tax year starting in April 2026, the savings structure is effectively unchanged.
Dividends: this is where there is a change from 6 April 2026
For 2026/27:
- the Dividend Allowance remains £500
This means the first £500 of dividend income is taxed at 0%.
- but the dividend tax rates increase from 6 April 2026 to:
- 10.75% ordinary rate
- 35.75% upper rate
- 39.35% additional rate
For owner-managed business owners who receive dividends, this is one of the clearest personal tax changes to be aware of at the start of the new tax year.
The practical message is not that dividends suddenly stop working. It is that the margin for casually extracting profits narrows a little further, and the personal tax cost of getting the mix wrong increases.
That makes it even more important to look at salary, dividends and pension contributions together rather than in isolation.
Property income: still within the main rates for 2026/27
For 2026/27, property income remains within the main income tax rates.
There is also still a property allowance of up to £1,000 for individuals with qualifying property income.
The government’s announced higher property income tax rates are scheduled for 6 April 2027, not 6 April 2026.
So if you have rental income in 2026/27, the focus is less about a new rate change this April and more about:
- how that income interacts with your wider tax bands
- whether it affects adjusted net income
- and whether it changes your exposure to Child Benefit or other thresholds
The tax system is complex and planning is required
For many business owners, personal tax exposure increases because several ordinary rules start interacting at once.
For example:
- dividends push adjusted net income above the Child Benefit threshold
- savings income or rental profits tip income into higher rate
- a larger dividend plus salary starts reducing Personal Allowance
- pension planning becomes more valuable, but also more nuanced
That is why remuneration planning, or a personal tax review, is most useful when it is joined up with the wider picture:
- how you are extracting value from the business
- what the company can afford
- what other income sources exist
- and what thresholds matter to you personally
For owner-managed businesses, the right answer is rarely just “take more dividends” or “keep salary low”. It is about looking at salary, dividends, pension contributions and wider personal income together, then making informed decisions around the tax year ahead.
Need a clearer remuneration plan for 2026/27?
If you run your own company and are not sure whether your current mix of salary, dividends and pension contributions is still efficient, our Remuneration Planning service is designed to help.
We look at your business and personal position together, so you can understand:
- how you are extracting value from the company
- where tax thresholds and allowances are starting to bite
- and whether your remuneration strategy still makes sense for the year ahead
If you would like to review your position for 2026/27, get in touch.
