April 2026 Tax Changes and Director Salary Planning: What You Need to Know
Introduction
The new tax year has arrived, and with it come a few important changes that could affect how you run your business and pay yourself.
Some of these updates are part of longer-term changes, like Making Tax Digital, while others relate to thresholds and planning. The key thing to remember is that small decisions now can make a noticeable difference to your tax position later in the year.
Here is a clear breakdown of what is changing and what you should be thinking about.
Making Tax Digital Is Expanding
From April 2026, Making Tax Digital (MTD) for Income Tax is being rolled out further.
If you are self-employed or a landlord with income over £50,000, you will now need to:
- Keep digital records
- Submit updates to HMRC every quarter
This moves things away from a once-a-year tax return and towards more regular reporting.
What this means for you
You will need to keep your bookkeeping up to date throughout the year, rather than catching up at the end.
If you are already using software like Xero, you are in a good position. If not, this is the right time to get systems in place so the transition is smooth.
National Insurance Changes
There have been updates to National Insurance thresholds and rates for the 2026 to 2027 tax year.
Key points include:
- The employee National Insurance threshold remains at £12,570
- The employer threshold is £5,000
- Employer National Insurance is charged at 15 percent
What this means for you
If you run a limited company, the level of salary you choose will directly affect how much employer National Insurance your company pays.
This is why salary planning is so important at the start of the tax year.
Corporation Tax Still Requires Careful Planning
Corporation tax remains structured as:
- 19 percent for profits up to £50,000
- 25 percent for profits above £250,000
- Marginal relief in between
What this means for you
How you take money out of your business still plays a big role in your overall tax position. Getting the balance right between salary and dividends is key.
Director Salary for 2026 to 2027
One of the most common questions is:
“How much should I pay myself as a director?”
There is no single answer, but there are a few common approaches.
Option 1: Low Salary (Below NI Credit Level)
A salary below £6,708 per year (around £559 per month):
- No income tax
- No employee National Insurance
- No employer National Insurance at that level
However, this level of earnings would not usually build National Insurance credits towards your state pension.
Best suited for
Directors who have other income or are not relying on state pension contributions.
Option 2: NI Credit Level Salary
A salary of around £6,708 per year:
- No income tax
- No employee National Insurance
- Can allow you to build National Insurance credits
This is often used where directors want to maintain their entitlement to state benefits without increasing tax or National Insurance costs.
Option 3: Personal Allowance Salary (Common Approach)
A salary of £12,570 per year (around £1,048 per month):
- No income tax
- No employee National Insurance
- Employer National Insurance will usually apply
Why this is commonly used
It makes full use of your personal allowance, but it does come with an employer National Insurance cost because it is above the employer threshold.
Whether this is the right option depends on your wider tax position.
Above £12,570
If your salary goes above this level:
- Income tax applies
- Employee National Insurance may apply
- Employer National Insurance applies
When this might be useful
In some cases, such as:
- Mortgage applications
- Pension contributions
- Reducing corporation tax
This usually needs proper planning to make sure it is beneficial overall.
Do Not Forget Dividends
For most directors, the most tax-efficient approach is still a combination of:
- Salary
- Dividends
Dividends are generally taxed at lower rates than salary, which is why this combination is commonly used.
Additional Planning Opportunities
Running a limited company gives you access to a few useful options:
- Trivial benefits (up to £50 per item)
- Staff events, such as a Christmas party
- Business expense reimbursements
- Employer pension contributions, which are often very tax-efficient
These can all help improve your overall tax position when used correctly.
What You Should Do Now
At the start of the new tax year, it is worth reviewing your setup.
You may want to:
- Review your director salary for April 2026
- Check whether Making Tax Digital applies to you
- Plan how you will take income from your business
- Speak to your accountant before making large withdrawals
Planning early makes things much easier later in the year.
Help for Business Owners
If you are unsure what the right approach is for your situation, it is always better to get clarity early.
OutsourceCloud is also offering an Accounts Review and Strategy Session for £39 plus VAT, which is a simple way to get tailored advice for your business.
If you would like help figuring out the best setup for you, feel free to get in touch.
