The short version
- Two dates drive most of the planning: 5 April for your own tax, and your company's year end for Corporation Tax.
- Spreading dividends across two tax years can keep more of them in the basic rate band.
- Company pension contributions and equipment purchases reduce Corporation Tax for the year they are paid or bought.
- Corporation Tax is payable 9 months and 1 day after your year end, three months before the return is due.
- Every one of these decisions needs up-to-date numbers before the date, not after it.
Two calendars are running at once
As a company director you live on two calendars. Your company has its own financial year, ending on its year end. You personally have the tax year, which runs from 6 April to 5 April. Most timing decisions come down to which side of one of those dates something falls.
The same decision, taken a week earlier or later, can land in a different tax year or a different accounting period. Sometimes that makes no difference. Sometimes it changes the tax bill.
Dividends: which tax year do they fall in?
A dividend is taxed in the tax year it is paid to you. For 2026/27, the first £500 of dividends is tax free. After that, dividends are taxed at 10.75% within the basic rate band and 35.75% in the higher rate band. For most people the basic rate band ends when total income reaches £50,270.
A simple example
A director takes a salary of £12,570 and has no other income. They want to take £40,000 in dividends.
- All £40,000 in March: roughly £2,300 of it falls into the higher rate band, at 35.75% rather than 10.75%.
- £20,000 in March and £20,000 in April: both amounts can stay within the basic rate band, one in each tax year.
On these figures, the split saves around £630, because the £2,300 stays in the basic rate band and the £500 dividend allowance is used twice, once in each year. The money is the same. Only the date changed.
Two things to check first. A dividend can only be paid from profits the company has available, so you need accurate, up-to-date figures before you declare one. And it needs the right paperwork: a board minute and a dividend voucher, dated when the dividend is actually paid.
Your salary: decide it before the tax year starts
Most directors of small companies take a modest salary and the rest as dividends. In 2026/27 the personal allowance is £12,570, and employer's National Insurance is 15% on salary above £5,000 a year.
The right salary level depends on your company. A key question is whether it can claim the Employment Allowance, which is not available to a company whose only employee paid above the threshold is a single director. For many single-director companies the sensible level sits somewhere between £5,000 and £12,570 a year.
The timing point: decide in March, before payroll starts for the new tax year. Changing it halfway through is possible, but messier.
Company pension contributions: paid, not promised
Pension contributions paid by your company are usually deductible for Corporation Tax in the accounting period in which they are actually paid. A contribution paid the week before your year end reduces this year's Corporation Tax. The same contribution paid the week after waits another year.
Contributions count towards your annual allowance, which is £60,000 for most people, and they need to be reasonable for the work you do for the company. Higher earners may have a lower allowance.
Buying equipment: before or after your year end?
Most equipment a small company buys for the business, such as computers, tools, machinery and vans, qualifies for the Annual Investment Allowance. Your accounts spread the cost over several years as depreciation, but for Corporation Tax the full cost is usually deducted from taxable profits in the period you buy it. Cars follow different rules.
So if you were going to buy a new laptop or van anyway, buying it before your year end rather than just after brings the tax saving forward by a full year.
One warning: do not buy something you do not need to save tax. Spending £1,000 to save £190 of Corporation Tax still leaves you £810 down.
Profits near £50,000: the band where timing matters most
Corporation Tax is 19% on profits up to £50,000 and 25% on profits above £250,000. In between, marginal relief applies, and each extra pound of profit in that band is effectively taxed at 26.5%. Those limits are shared between any associated companies.
If your profits sit in that band, the timing of a pension contribution or an equipment purchase is worth more to you than it would be at 19%.
Corporation Tax is due before the return
This catches almost everybody out at least once. The Corporation Tax return is due 12 months after your year end, but the tax itself is payable 9 months and 1 day after it.
For a 31 March 2026 year end, the tax is due by 1 January 2027. The return can follow by 31 March 2027. Setting money aside each month, based on up-to-date figures, means the payment is never a surprise.
Why timing needs a look before the date, not after
Every decision in this guide has a deadline, and none of them can be fixed afterwards. Once 5 April or your year end has passed, the opportunity has gone for that year.
That is why the useful time to talk is a couple of months before each date, with current figures in front of us. It is exactly what the quarterly review in my Company Plus package is for.
Christina Ding runs Ding Accounting in Bournemouth. Nearly 30 years in finance, more than ten of them as a Financial Controller. ICB Practice Licence No. 25151. More about me
This guide is general information, based on the rules for the 2026/27 tax year as I understand them at October 2026. It is not advice for your particular situation. Tax rules change, and the right answer depends on your full circumstances, so please talk to me before acting on it.