The Autumn Budget has been and gone, but it marks a clear shift in the taxation of business owners, directors and high earners.

For years, remuneration planning has relied on a blend of salary, dividends and pension contributions to maintain take-home pay.

The Chancellor’s new measures now close off several of these long-standing routes, signalling a deliberate move towards, what the Government describes as, greater “fairness” in the tax system.

Fiscal drag continues to widen the tax net

Income Tax and National Insurance thresholds remain frozen until 2031, meaning more individuals will be pushed into higher bands as wages rise.

For directors already close to the higher and additional rate thresholds, even modest pay increases risk forcing them into higher bands, with those within the additional rate seeing additional tapering of the personal allowance.

The result is higher effective tax and fewer planning levers available, especially with the other changes outlined in the Budget.

Higher dividend tax narrows the gap

Dividends have long been a flexible profit extraction method. From April 2026, the main dividend rates each rise by two per cent, taking:

  • The ordinary rate from 8.75 per cent to 10.75 per cent
  • The upper rate from 33.75 per cent to 35.75 per cent

The additional dividend rate remains 39.35 per cent.

Overall, dividends still carry a tax advantage, but a smaller one, meaning directors will need to reassess the balance between salary and dividend drawings.

Salary sacrifice pensions: opportunities before 2029

Pensions remain a cornerstone of efficient remuneration planning. However, from April 2029, tax and National Insurance relief on salary sacrifice contributions will be capped at the first £2,000 each year.

This reduces the scope for high earners to save tax efficiently through this approach, but it also creates a valuable planning window over the next few years.

Maximising contributions under the current rules, while considering cashflow and wider business plans, may help offset the broader tax squeeze.

What now for business owners and directors?

Despite a more restrictive policy landscape, effective strategies still exist. Early planning will be essential as more of the traditional reliefs and mechanisms become limited in the coming years.

We continue to work with clients to understand how these changes affect remuneration, long-term planning and financial resilience.

If you would like to discuss the implications for your own position, please get in touch.