Question 1

What is the most tax efficient director salary in 2026-27?

Accepted Answer

For most solo founders it is £12,570, the personal allowance. Below that you waste allowance you cannot carry forward. Above it every extra pound carries 20 percent income tax, 8 percent employee National Insurance and 15 percent employer National Insurance. A company whose only employee is its sole director cannot claim the Employment Allowance, so there is nothing to offset that employer cost. At some profit levels the answer flips to £5,000, the secondary threshold, because a larger salary pushes more income into the band where the personal allowance is being withdrawn, or because corporation tax marginal relief has run out and the deduction the salary buys no longer covers the National Insurance it costs.

Question 2

Can I claim use of home as office through my limited company?

Accepted Answer

Yes. The company can pay a director £6 a week, £312 a year, with no receipts and no tax on either side. A larger claim based on a proportion of your actual household costs is possible but needs a licence agreement between you and the company, and can create personal tax, so it is worth taking advice first.

Question 3

What is the 60 percent tax band?

Accepted Answer

Between £100,000 and £125,140 of income the personal allowance is withdrawn by £1 for every £2 earned. You pay 40 percent on the pound you earned and 40 percent on the 50 pence of allowance it took away, so the effective marginal rate is 60 percent. A pension contribution that brings income back to £100,000 is relieved at that same 60 percent.

Question 4

What happens if I owe my own company money?

Accepted Answer

If a director loan is still outstanding nine months and one day after the company year end, the company pays a section 455 charge of 33.75 percent of the balance. It is refunded once the loan is repaid, so it is cash locked up rather than cash lost, but it can sit with HMRC for a long time. A balance over £10,000 at any point in the year also creates a taxable benefit in kind.