Calculate the most tax-efficient split between director salary and dividends from your limited company. Shows Corporation Tax, income tax, NI and dividend tax in one view.
Last updated: April 2026
Limited company details
Typical optimal: £9,100 (NI secondary threshold) or £12,570 (PA). Salary is deductible from CT.
Any PAYE income, rental income etc. alongside the director salary.
Must not exceed company profit after salary and Corporation Tax.
Director tax summary
Total personal take-home
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Company profit (pre-salary) -
Corporation Tax (25% / 19%) -
Personal income tax -
NI (employee) -
Dividend tax -
Overall effective tax rate -
Cash flow summary
Salary received -
Dividend received -
Tax & NI on salary -
Dividend tax -
Salary vs dividends for limited company directors
Limited company directors can choose how to extract money from their company - as salary (subject to income tax and NI), as dividends (subject to dividend tax, which is lower), or as a combination. Because dividends are paid from post-Corporation-Tax profits, the total tax picture involves both company-level and personal-level taxes.
The optimal salary level
Most owner-directors set their salary at one of two points: the NI secondary threshold (£9,100 in 2026/27) - which keeps the company below the threshold where employers' NI (13.8%) becomes due - or the Personal Allowance (£12,570) - which uses the full personal allowance without triggering employee NI (which starts at £12,570). The difference between the two salary levels is small in tax terms, but taking a salary at £12,570 builds a qualifying year for the State Pension, which has long-term value. If the company has other employees or the director has other PAYE income already, the calculation changes.
Dividend tax rates in 2026/27
Dividends above the £500 annual dividend allowance are taxed at 10.75% (basic rate), 35.75% (higher rate), or 39.35% (additional rate). These rates are substantially lower than equivalent income tax rates (20%, 40%, 45%), which is the core reason director remuneration through dividends is more tax-efficient than salary alone. The dividend allowance was reduced from £2,000 to £500 from April 2024, making dividend tax planning more important for directors taking regular dividends.
Frequently asked questions
Corporation Tax is charged on company profits - the income less allowable deductions including the director's salary, pension contributions, and business expenses. The main rate is 25% on profits over £250,000 and the small profits rate is 19% on profits under £50,000, with marginal relief between the two thresholds (an effective rate between 19% and 25% for profits of £50,000–£250,000). This calculator uses a simplified approach - for accurate Corporation Tax calculation for your specific situation, consult an accountant.
Yes - employer pension contributions are a highly tax-efficient way to extract money from a limited company. They are deductible from Corporation Tax as a business expense, meaning the company saves 19–25% Corporation Tax on the contribution. There is no income tax or NI on contributions made directly from the company to a pension. Combined with the normal tax relief on pension growth, this is often the most tax-efficient extraction method for profits above what you need for personal income. Subject to the annual allowance (£60,000 for most in 2026/27).
Most limited company directors use an accountant, particularly in the early years. The filing requirements are more complex than sole trader self-assessment - annual company accounts must be filed with Companies House, a Corporation Tax return with HMRC, and a personal Self Assessment return. An accountant typically costs £800–£2,000 per year for a small owner-managed company and can save considerably more than their fee through legitimate tax planning. Some directors use accounting software (Xero, FreeAgent, QuickBooks) and only seek accountant review at year end, reducing costs.