For many high-earning professionals, accountancy often starts with compliance, such as tax returns and year-end accounts.
However, as income grows and circumstances evolve, proactive advice can uncover opportunities that go far beyond simply meeting requirements.
This was the case for one of our clients, Paul, who is a high-earning professional generating over £300,000 a year. Paul approached our accountancy team looking for a more strategic approach to managing his finances and significant tax liabilities.
Following a review of Paul’s employed and private income streams, Client Portfolio Manager Chandler Enticknap identified an opportunity to restructure Paul’s private work through a limited company. This created greater flexibility around how income was taken, alongside improved tax planning and long-term financial management.
What was the client’s situation?
Paul was a high-earning healthcare professional, earning over £300,000 a year through a combination of employed income and additional private contract work. He was the sole earner in the household, while his wife, Amanda, stayed at home to care for their young children.
Paul was seeking help as he wanted a strategy that would help reduce his significant tax bill and administrative burden from earning two income streams, as Chandler explains:
“In our initial meeting, my focus was on understanding Paul’s situation, what he was trying to achieve and whether there were opportunities to improve his position through more strategic planning and potential business structuring.
While this level of income provided financial security, it also created several challenges. Once earnings exceed £100,000, the personal allowance begins to taper, meaning more of Paul’s income was being taxed at higher rates. As his earnings increased further, a considerable proportion fell into the additional rate tax band (45%), with some income effectively taxed at 60% due to the restriction of his personal allowance.
Managing two income streams also added complexity, increasing the administrative burden and time spent on compliance for Paul, particularly with upcoming quarterly reporting requirements under Making Tax Digital.”
From this meeting Chandler established that Paul needed:
- Clarity on whether his income structure was still appropriate.
- Ways to reduce his personal tax exposure.
- Support to reduce time spent on administration.
Our approach: Reviewing income and tax structure
Chandler carried out a full review of Paul’s income streams and how they were taxed.
Under Paul’s existing structure:
- Paul’s private income was being taxed separately as self-employed income.
- A large proportion was therefore taxed at 45% income tax, plus National Insurance.
- Paul had lost his personal allowance (£12,570 tax-free) and his wife, Amanda, was not utilising her own personal allowance due to being out of work.
In the UK, current income tax rates are as follows:
| Level of income | Income tax rate |
| Up to £12,570 (personal allowance) | 0% |
| £12,570 to £50,270 | 20% |
| £50,270 to £125,140 | 40% |
| £125,140 and above | 45% |
“Once income exceeds £100,000, the personal allowance is gradually reduced. For every £2 earned above this level, £1 of tax-free allowance is lost and is fully restricted by £125,140.
This means income within this range is taxed at 60% as the personal allowance which has now been removed, no longer receives tax relief of 20%”
To illustrate how this applied to Paul’s £300,000 annual income, see below:
| Income range | Tax treatment | What this means |
| £0 to £12,570 (personal allowance) | 0% (usually) | This was fully lost once Paul’s income reached £125,140. |
| £12,570 to £50,270 | 20% | Basic tax rate, with no personal allowance available due to high income. |
| £50,270 to £100,000 | 40% | Higher tax rate. |
| £100,000 to £125,140 (Personal allowance taper threshold) | 40% (effective marginal rate up to 60%). | Income is taxed at 40%, alongside the gradual loss of the personal allowance which increased the effective marginal tax rate to 60%. |
| £125,140 to £300,000 | 45% | Additional tax rate. |
This meant that a considerable portion of Paul’s additional income was either taxed at 45% or impacted by an effective rate of up to 60%, significantly increasing his overall tax burden.
Our solution: Introducing a limited company structure
Following the review of Paul’s financial situation, Chandler recommended incorporating his private work into a limited company.
“The aim was not just to reduce tax in the short term, but to create a structure that offered greater flexibility around how and when income can be taken and how it supports the family’s wider financial plans.”
This new structure allowed:
- Profits to be taxed initially at corporation tax rates (typically between 19% to 25%).
- Income to be drawn more flexibly and tax-efficiently through salary and dividends.
- Surplus profits to be retained within the business for tax-efficiency or reinvested for long-term growth.
Creating flexibility through dividend planning
An alphabet share structure was also introduced to Paul, which involves creating different classes of shares so income can be distributed more flexibly between shareholders. This structure enabled income to be distributed between Paul and Amanda in a tax-efficient manner.
“Amanda was appointed as a director in the limited company and undertook a role supporting the business’s day-to-day operations and communications. This approach was structured in line with HMRC requirements, which call for the work performed to be commercially justifiable and formed part of the company’s normal activities.
As part of this arrangement, Amanda received a salary of £12,570, aligning with her personal allowance, alongside £30,000 in dividends based on her shareholding and her level of involvement in the business.
This approach improved tax efficiency across the household by allowing income to be distributed more effectively between Paul and Amanda, with dividends typically being subject to lower tax rates than employment income. By making use of both personal allowances and available dividend allowances, the overall personal tax burden was reduced without impacting the family’s overall monthly income.
In simple terms, any income taken by Amanda is taxed at a lower rate, meaning Paul does not need to draw that income at the additional rate of 45%.”
Dividend tax rates for 2026/27 are as follows:
| Threshold (based on level of income) | Dividend tax rate |
| Basic rate taxpayers (Income up to £50,270) | 10.75% |
| Higher rate taxpayers (Income between £50,271 to £125,140) | 35.75% |
| Additional rate taxpayers (Income above £125,140) | 39.35% |
For example:
Amanda was appointed as a director in the business and supports with day-to-day operations to include invoicing, bookkeeping, diary management and communications with clients.
For her role within the company, Amanda receives:
- A £12,570 salary and £30,000 in dividends (£42,570 in total).
Her salary is subject to 0% income tax and is free from National Insurance (NI) as it is within her personal allowance.
Dividends do not attract National Insurance (a key benefit) and there is a £500 tax-free allowance.
This means Amanda receives:
- £12,570 salary, income tax and NI free.
- £500 in dividends tax-free.
- £29,500 in dividends taxed at 10.75% (basic dividend tax rate) = approximately £3,171 in tax.
This means Amanda’s total net income = £39,399 (£42,570 – £3,171).
Beyond tax: Reducing admin and improving visibility
Chandler explained that starting a limited company comes with additional administrative responsibilities, which we are able to support with on an ongoing basis, including:
- Bookkeeping and accounts.
- Personal tax returns.
- Ongoing tax planning reviews.
- Income structure between spouses.
“We don’t just step in at year-end; we are reviewing things throughout the year so that Paul and Amanda can make informed and confident decisions as their situation changes over time.
This helped reduce the administrative pressure that Paul was experiencing and provided him with peace of mind that his family’s finances are being handled compliantly, on time and in accordance with any rate or policy changes.”
Regular reviews also ensured that opportunities for tax planning, pension contributions and future investment strategies could be identified proactively and raised with the Cooper Associates Wealth Management team.
Additional planning opportunities
The benefits of the new structure extended far beyond immediate tax savings.
By retaining surplus profits within the company, Paul gained greater flexibility around future pension contributions, investment opportunities and long-term wealth planning.
Chandler referred Paul to Cooper Associates Wealth Management, where our team of expert financial advisers held additional discussions around potential planning opportunities, including:
- Pension planning.
- Investment planning.
- Managing surplus business funds.
- Future retirement planning.
- Long-term estate planning considerations.
“We weren’t just looking at the current tax year. We were looking at how the structure could support Paul and Amanda’s wider financial goals over the longer term, which happened to involve our team of financial advisers providing advice on any planning opportunities.
This is a part of the holistic service that we offer to ensure clients are always in the best position possible.”
What was the outcome?
The outcome was a significantly more efficient and flexible structure that resulted in:
- Paul’s income tax bill would become significantly reduced (exact savings will vary depending on several factors such as your circumstances and contributions, amongst others).
- Use of both Paul and Amanda’s income tax and dividend allowances to mitigate the ultimate exposure to income tax.
- Greater flexibility around remuneration and dividend planning.
- Lower administrative burden from ongoing bookkeeping support, annual accounts preparation and personal tax return services.
- Regular tax planning reviews.
- Greater control over income timing and distribution.
- Access to ongoing, proactive advice.
- Access to wider wealth management support (e.g. pension planning and estate management opportunities).
Paul and Amanda now have access to proactive advice throughout the year, helping them make informed decisions as their business, income and family circumstances continue to evolve.
Final reflection
This case highlights how, for high earners, the way income is structured can be just as important as how much is earned.
With the right advice, it’s often possible to:
- Reduce unnecessary tax exposure.
- Simplify processes around how income is received and declared.
- Plan more effectively and tax-efficiently for the future.
By taking a proactive and holistic approach, Chandler was able to identify opportunities that improved tax efficiency, created greater flexibility around remuneration and helped Paul build a stronger, long-term financial strategy with support from our team of accountants and financial advisers.
While every client’s circumstances are different, this case demonstrates how accountancy advice can often extend far beyond compliance, helping clients make more informed decisions and maximise the opportunities available to them.
How can Cooper Associates Accountancy help?
As life changes, your finances often need to adapt with it too.
If what worked a few years ago is no longer the best fit today, that is completely normal and whenever things change, we are here by your side.
If you would like to explore whether your current setup is still working as efficiently as it could be, feel free to get in touch to book a fee-free, no-obligation conversation, where we can take a look at your situation, talk through your options, and help you decide on the right next steps.
*The names used in this article have been changed to protect the anonymity of our clients.
