What changed in the Budget
The Chancellor announced a 2% tax increase on Dividends, savings and property income from April 2026.
Owner-managed companies have the flexibility to choose whether to take remuneration as dividends or salary, a decision with tax and commercial implications. However, over recent years and budgets, the tax differences between dividends and salary have decreased. The latest announcement further closes this gap.
As a general rule, taking a salary means company tax savings, but a lower net take-home position for the individual due to higher tax rates and National Insurance. Whilst taking a dividend results in no company tax relief, but a higher net take-home position for the individual.
The choice of remuneration strategy becomes increasingly complex depending on a number of variables, both personal and corporate, such as the rates of corporation tax paid by the company (currently ranging from 19%-25%), which can change from year to year.
Other factors owners should consider when deciding their 2026/2027 remuneration
Outside of the Budget, there have been a number of legislative changes which will have a significant impact on the disclosure of remuneration of directors/owners of small businesses.
- Accounting changes – For periods commencing on or after the 1 January 2026, Dividends will become a compulsory disclosure in small company financial statements filed at Companies House.
This will increase significantly the visibility of shareholder remuneration on public record.
- Company Law changes – The Economic Crime and Corporate Transparency Act introduced the requirement that, from the 1 April 2027, small companies will also be required to file summary profit and loss information at Companies House. This means that small companies will disclose key information such as Turnover, Costs and Profit/Losses.
- In addition, HMRC have changed tax reporting so that information about shareholdings will also now need to be included in self-assessment tax returns from 25/26
So, what does this all mean for salary/dividends for 2026/27….
Here are 3 steps all small company business owners should take:
- Assess the impact of the disclosure changes
Remuneration via Salary
- Included in the accounts as an expense, decreases trading profits/increase trading losses disclosed on Companies House
- Salary will not be separately disclosed within expenses, and therefore retain privacy
Remuneration via Dividends
- Disclosed via note and no impact on disclosed trading profits/losses
- Separate summary disclosure in the financial statements on Companies House reducing privacy
2. Consider stakeholder impact
Business owners need to consider how the above changes to disclosures will impact the wider stakeholders of the business. Listed below is a summary of concerns we have heard over the last 6 months when discussing these changes with clients:
- With dividends now visible all employees will now be able to see my remuneration.
- If I declare salaries instead of dividends, my trading profits will decrease – won’t this make my business look less successful?
- So, if I declare salary, it may be less tax advantageous, but it does give me privacy in my remuneration. That’s essentially a cost of privacy.
- So my remuneration choice could potentially impact gross profit, net profit and therefore my suppliers’ and customers’ assumptions over my business.
3. Make an informed decision
It’s never been more important for a small business to work with its advisor to review financial forecasts, understand tax liabilities, and assess disclosure changes and their commercial impact.
We are seeing many clients we speak to change their remuneration strategy with more emphasis on retaining privacy and managing stakeholder impact. It’s important not to leave these conversations too late, as comparative information will be shown in the financial statements.
If you would like to understand how your remuneration strategy could impact your business, get in touch here.
Join our experts on Thursday, 4 December 2025, for our Budget Seminar and discover what the Budget could mean for you and your business.
