Salary vs dividends · 2026/27

The optimal director's salary, actually computed

Most guides just assert £12,570. We run each candidate salary through the real Corporation Tax engine — employer NI, CT relief, dividend tax and all — and show which one leaves you with the most.

Your company
Profit before the director's salary, for a 12-month year.
SalaryEmployer NICorp. taxDividendsPersonal taxTake-home
£5,000.00£0.00£10,825.00£44,175.00£3,881.29£45,293.71
£9,100.00£615.00£9,575.52£40,709.48£3,949.49£45,859.99
£12,570.00 ★£1,135.50£8,795.96£37,498.54£3,977.34£46,091.20

Best salary at £60,000.00 profit

£12,570.00

Leaves £46,091.20 in your pocket after all company and personal tax.

How the trade-off works

Every pound of salary is deductible against Corporation Tax, so it saves 19%–26.5% at the company. But salary above £5,000 triggers 15% employer National Insurance, and above £12,570 it triggers employee NI and income tax too. The best salary is the point where the Corporation Tax relief still beats those costs.

£12,570 usually wins — but not always by much

For a sole director who can't claim the Employment Allowance, the CT relief on salary between £5,000 and £12,570 still edges out the 15% employer NI. Add a second employee and the allowance wipes out the employer NI entirely, so £12,570 wins comfortably. Below the Corporation Tax small-profits threshold the margins narrow — which is why we compute it rather than assert it.

Then take the rest as dividends

Whatever profit is left after salary and Corporation Tax comes out as dividends, which carry no National Insurance and lower headline rates. The dividend tax calculator shows the personal-tax side of that split in detail.

Common questions

What's the most tax-efficient director's salary for 2026/27?

For a sole director in 2026/27, a salary at the £12,570 personal allowance is usually best: the Corporation Tax relief on the extra salary outweighs the employer National Insurance it triggers, even though a single-director company can't claim the Employment Allowance. Companies with a second employee can claim the allowance, which removes the employer NI cost and makes £12,570 clearly optimal.

Why not just take a big salary, or none at all?

Salary is deductible against Corporation Tax and dividends aren't, so a pound of salary saves 19%–26.5% of Corporation Tax. But salary above £5,000 triggers 15% employer NI, and above £12,570 triggers employee NI and income tax. The sweet spot is where the CT relief still beats those costs — usually right at the £12,570 allowance.

Can I claim the Employment Allowance?

The Employment Allowance (£10,500 in 2026/27) offsets employer National Insurance, but a company whose only employee is also a director isn't eligible. Take on a second employee earning above the secondary threshold and you can claim it — which is why two-director or director-plus-spouse companies often pay a higher salary.

General information for the 2026/27 tax year, assuming a single 12-month period, no other income, no pension contributions and English rates. Your own optimum can differ — this is not tax advice.