Running a limited company in the UK comes with tax responsibilities, but understanding how it all works can help you reduce your tax bill and keep more of your profits.
In this guide, we break down exactly how much tax you’ll pay, how it’s calculated, and how to structure your income efficiently.
What Tax Does a Limited Company Pay?
Limited companies in the UK mainly pay:
- Corporation Tax
- Dividend Tax (on personal income)
- National Insurance (if taking a salary)
Corporation Tax Explained
Corporation Tax is charged on your company’s profits.
Current rates (2026):
- 19% (small profits)
- Up to 25% (higher profits)
Example:
If your company makes £50,000 profit:
- Tax ≈ £9,500
- Remaining profit = £40,500
Salary vs Dividends (Most Tax Efficient Method)
Most directors take a combination of:
Salary:
- Tax-efficient up to threshold
- Helps maintain National Insurance record
Dividends:
- Paid from profits after tax
- Lower tax rates than salary
👉 This structure helps reduce overall tax.
Allowable Expenses (Reduce Your Tax)
You can reduce your tax bill by claiming expenses such as:
- Office costs
- Software subscriptions
- Travel
- Professional fees
👉 The rule: must be wholly and exclusively for business
Common Mistakes to Avoid
- Not setting aside tax money
- Mixing personal and business expenses
- Missing filing deadlines
FAQs
Do I pay tax on all company income?
No — only on profit after expenses.
Can I take all money as dividends?
No — you usually need a salary structure too.
Do I need an accountant?
Not legally, but highly recommended.
Final Thoughts
Understanding your tax position early can save you thousands. With the right structure and planning, you can legally minimise your tax and grow your business more efficiently.
Call to Action
Need help managing your company tax? Get in touch today for clear, expert advice.
