Summary of what £50,000 of company cash is worth after tax in 2026/27
- £50,000 of profit leaves £37,500 once a company pays corporation tax at 25%, or £40,500 at 19%.
- Left in a 4% savings account, that cash earns about 3% after corporation tax on the interest.
- Paid out as a dividend, a higher-rate owner keeps £24,093.75 and a basic-rate owner keeps £33,468.75.
- Paid into a pension as an employer contribution, the full £50,000 goes in with no corporation tax and no National Insurance.
- That pension is worth £42,500 after tax if it is taken later at a basic rate, and £35,000 at a higher rate. It cannot be touched until age 55, which rises to 57 on 6 April 2028.
- The pension annual allowance is £60,000 in 2026/27, and unused allowance from the last three years can often be carried forward.
A company that makes more profit than it needs has a choice to make. The cash can stay in the company, go to the owner as a dividend, or go into a pension. Each route is taxed differently, and the gap between them is large enough to change which one makes sense.
This page compares them on the same £50,000 of profit. Every rate is taken from GOV.UK or HMRC and the pound figures are arithmetic on those rates. They are illustrations. Your own position depends on your other income, the size of your company and what you plan to do with the money.
What happens to cash that stays in the company?
Profit is taxed before it can be saved. A company pays corporation tax at 19% on profits up to £50,000 and 25% on profits over £250,000, with marginal relief between the two. On £50,000 of profit at the main rate the company keeps £37,500. At the small profits rate it keeps £40,500.
Interest the company earns on that cash is taxed too. A company pays corporation tax on income from investments, and interest on its savings counts as part of its profits. A savings account that pays 4% therefore adds about 3% after tax to a main-rate company.
Worked example
What £37,500 of company cash grows to in three years in a 4% savings account
If interest were not taxed
- Start
- £37,500.00
- After 1 year
- £39,000.00
- After 2 years
- £40,560.00
- After 3 years
- £42,182.40
£42,182 after 3 years
After 25% corporation tax
- Start
- £37,500.00
- After 1 year
- £38,625.00
- After 2 years
- £39,783.75
- After 3 years
- £40,977.26
£40,977 after 3 years
£1,205 less after three years, because tax takes a quarter of each year's interest
The example assumes interest is paid once a year at 4% and the company pays the main rate on it. We chose 4% as an illustration. Bank Rate is 3.75% and what your bank pays is its own choice, as the Bank Rate article explains. A company with more than £120,000 at one authorised bank also has money above the deposit protection limit.
What is a dividend worth after tax?
A dividend comes out of profit that has already paid corporation tax. The owner then pays dividend tax on it. The first £500 of dividends each year is free of tax. Above that the rates are 10.75% in the basic-rate band, 35.75% in the higher-rate band and 39.35% in the additional-rate band. Higher-rate income tax starts above £50,270.
| Company pays | Owner pays | Company keeps | Owner keeps |
|---|---|---|---|
| 19% corporation tax | Basic rate | £40,500.00 | £36,146.25 |
| 19% corporation tax | Higher rate | £40,500.00 | £26,021.25 |
| 25% corporation tax | Basic rate | £37,500.00 | £33,468.75 |
| 25% corporation tax | Higher rate | £37,500.00 | £24,093.75 |
The table leaves out the £500 dividend allowance and the personal allowance of £12,570. Companies with profits between £50,000 and £250,000 pay a blended rate between 19% and 25%.
A higher-rate owner of a main-rate company keeps less than half of each pound of profit taken this way. The Labour tax changes article shows how the dividend rates rose in April 2026.
What is a pension contribution worth?
A company can pay into a pension for a director or employee. HMRC says employer contributions to a registered scheme are normally allowable for corporation tax unless the payment has a purpose other than the trade. It looks at the whole pay package, so the total pay has to be reasonable for the work the person does. A contribution that qualifies cuts the company's profit, and so its corporation tax, by the full amount.
HMRC also says the National Insurance relief on traditional employer pension contributions is unchanged. The change from 6 April 2029 targets salary sacrifice, where only the first £2,000 a year stays free of National Insurance.
How much can go in
The annual allowance is £60,000 in 2026/27. It counts everything paid into the pension in the year, including the employer's contribution. You can often carry forward unused allowance from the previous three tax years. A reduced allowance applies when threshold income is over £200,000 and adjusted income is over £260,000.
How it is taxed when you take it out
You can usually take up to 25% of the pension as a tax-free lump sum, up to a limit of £268,275. The rest is taxed as income when you take it. The money cannot normally be touched before the minimum pension age, which is 55 now and rises to 57 on 6 April 2028.
Worked example
What £50,000 of company profit is worth to a higher-rate owner
Paid out as a dividend
- Profit
- £50,000
- Corporation tax at 25%
- £12,500
- Dividend tax at 35.75%
- £13,406.25
- Owner keeps
- £24,093.75
£24,094 today
Pension, taken later at 20%
- Profit paid in
- £50,000
- Corporation tax
- £0
- Income tax on 75% at 20%
- £7,500
- Owner keeps
- £42,500
£42,500 after age 55 or 57
Pension, taken later at 40%
- Profit paid in
- £50,000
- Corporation tax
- £0
- Income tax on 75% at 40%
- £15,000
- Owner keeps
- £35,000
£35,000 after age 55 or 57
£18,406 more kept by the pension route at a 20% rate than by the dividend, but only from age 55 or 57
The example assumes the whole pension is taken at once, that the 25% tax-free part is within the £268,275 limit, and that the taxed part falls within the stated rate. Spreading withdrawals across several years can lower the rate. The pension is also tied up until age 55 or 57, and pension rules can change before you reach it.
From 6 April 2027 most unused pension funds count as part of a person's estate for inheritance tax. The Labour tax changes article covers that change.
How do the routes compare?
No route wins on every measure. The table sets out when each one gives you the money, how it is taxed along the way and what it suits.
| Route | When you can use the money | Tax along the way | Suits |
|---|---|---|---|
| Leave it in the company | Whenever the company chooses | Corporation tax on interest, then tax again when paid out | Cash you may need soon, or while you decide |
| Pay it out as a dividend | Straight away | Dividend tax of 10.75% to 39.35% above the £500 allowance | Money you need personally now |
| Pay it into a pension | From age 55, rising to 57 on 6 April 2028 | Income tax on withdrawals after the 25% tax-free part | Money you will not need for years |
| Repay a loan | Straight away, the saving is immediate | No tax on the interest you stop paying | A loan that costs more than your cash earns |
Should surplus cash pay off a loan instead?
Cash in a savings account earns about 3% after tax. A tracker loan priced at Bank Rate plus 4 points costs 7.75% today, before any tax relief on the interest. Repaying the loan saves the full interest charge. The Bank Rate article shows what each movement in the rate does to a loan of £100,000. Check the early repayment terms before you pay a loan down.
What dates should you know?
- The Autumn Budget. It can change the rates in this article.
- Bank of England announcement on Bank Rate.
- Tax year ends. Pension contributions paid by this date count towards 2026/27.
- Most unused pension funds come into inheritance tax.
- The minimum pension age rises from 55 to 57.
- National Insurance relief on salary sacrifice pension contributions is capped at £2,000 a year.
What should an owner ask an accountant?
- How much cash does the company need to keep for the next twelve months? Only the surplus above that is free to move.
- How much of our pension allowance have we used, and how much can we carry forward? The allowance is £60,000 this year and unused amounts from three earlier years can often be added.
- Would a pension contribution from the company be allowable at our level of pay? HMRC looks at whether total pay is reasonable for the work done.
- Does the cash we hold affect any tax relief if we sell or pass on the business? Ask before the balance grows large, because the answer may shape the decision.
- What does our bank actually pay us, and is it the best rate available? A rate quoted as 4% is about 3% to a main-rate company once tax is taken.
Where profit goes is one half of keeping more. The other half is how much the business makes. You can see how similar businesses near you are doing with our free competitor report, and the Grow profit page covers how to bring in more. The IQ Money calculators let you put your own figures into the sums.
Questions owners ask
Is interest on company savings taxable?
Yes. A company pays corporation tax on income from investments, and interest on its savings counts as part of its profits. The rate is 19% on profits up to £50,000 and 25% on profits over £250,000, with marginal relief in between.
Can a company pay into a director's pension?
Yes. Employer contributions to a registered pension scheme for a director or employee are normally allowable for corporation tax unless the payment has a purpose other than the trade. HMRC looks at whether the total pay is reasonable for the work done.
How much can a company pay into a pension?
The annual allowance is £60,000 in 2026/27. It covers contributions from everyone, including the employer. Unused allowance from the previous three tax years can often be carried forward. A reduced allowance applies to people with higher incomes.
Is there National Insurance on employer pension contributions?
Not on traditional employer contributions. HMRC says the relief on them is unchanged. A £2,000 yearly limit on National Insurance relief for pension contributions made through salary sacrifice starts on 6 April 2029.
When can I take money out of a pension?
The normal minimum pension age is 55 and rises to 57 on 6 April 2028. You can usually take up to 25% tax-free, up to a limit of £268,275. The rest is taxed as income.
Is a dividend or a pension contribution better for an owner?
It depends on how soon you need the money and what rate of tax you will pay when you take it out. On £50,000 of profit taxed at 25%, a higher-rate owner keeps £24,093.75 from a dividend. The same £50,000 paid into a pension is worth £42,500 after tax if it is later taken at a basic rate, but the money is locked away until at least age 55.
What is the dividend tax rate in 2026/27?
Dividends above the £500 allowance are taxed at 10.75% in the basic-rate band, 35.75% in the higher-rate band and 39.35% in the additional-rate band.
Keep reading
Sources
- Corporation Tax rates (GOV.UK).
- Corporation Tax (GOV.UK). Investment income is part of taxable profits.
- Loan relationships and corporation tax (HMRC Corporate Finance Manual). How a company's interest is taxed.
- Tax on dividends (GOV.UK). The £500 allowance and the 2026/27 rates.
- Income Tax rates and Personal Allowances (GOV.UK).
- Tax on your private pension, annual allowance (GOV.UK). The £60,000 allowance and carry forward.
- Tax-free amount you can take from your pension (GOV.UK). The 25% lump sum and the £268,275 limit.
- Individual lump sum allowances (GOV.UK).
- Increasing normal minimum pension age (HMRC). Age 57 from 6 April 2028.
- Employer pension contributions (HMRC Business Income Manual). When contributions are allowable.
- Salary sacrifice reform for pension contributions (HMRC). National Insurance on employer contributions and the £2,000 limit.
- Inheritance Tax, unused pension funds and death benefits (HMRC).
- What is the Financial Services Compensation Scheme (Bank of England). The £120,000 deposit limit.
This article is general information for owners of UK limited companies. The pound figures are arithmetic on published rates and are illustrations. The 4% savings rate is an assumption. It is not tax, legal, pension or financial advice. Income tax bands are different in Scotland. Speak to a qualified adviser about your own circumstances.
