Running a company

Salary vs dividend

How to split what your company earns between a salary and a dividend, and what reaches you once both National Insurances, corporation tax, income tax and dividend tax have been taken. Built on the 2026/27 figures, which moved.

The split that leaves you with most

On £100,000 of profit

Salary: £12,570
Dividend: £67,176
Employer National Insurance: −£1,136; Paid by the company on your salary. The Employment Allowance would cover this, and a sole director cannot claim it.
Corporation tax: −£19,118
Income tax on salary: £0
Your National Insurance: £0
Dividend tax: −£14,412

You keep

£65,335

65% of the profit reaches you. The other £34,665 is tax, company and personal together.

You keep65%£65,335
Corporation tax19%£19,118
Dividend tax14%£14,412
Employer NI1%£1,136
Income tax0%£0
Employee NI0%£0

Against taking it all as dividend

Paying no salary at all and taking £77,250 of dividend leaves you with £63,731. The split above is worth £1,604 more, because a salary is deductible against corporation tax and a dividend is not.

Information, not advice. Whether this split is right for you depends on things this page does not know — your pension, your other income, what the company needs to retain. Take it to an accountant before you act on it.

Why this gives a different answer

Most salary-versus-dividend guides recommend a salary at the personal allowance on the basis that the Employment Allowance wipes out the employer National Insurance. A company whose only employee is a single director cannot claim that allowance — and that is the most common company among the people reading this. Leave the box unticked and the sum changes.

The second difference is corporation tax. Between £50,000 and £250,000 of profit, marginal relief makes the effective rate climb to 26.5 per cent — higher than the 25 per cent headline — and that band is where a great many of these companies sit. Approximating it with a flat rate gets the comparison wrong in the exact place it matters.

The third is that dividends stack on top of salary, so the band a dividend falls into depends on the salary underneath it. The two cannot be chosen separately, which is why this searches the whole range rather than applying a rule of thumb.

The figures underneath

Every rate below is a registered entry carrying the page it was read from and the date it must be read again. The same objects feed the rates hub, so a figure cannot be right there and wrong in this calculator.

Corporation tax on company profits.: 19% up to £50,000, 25% above £250,000, with marginal relief in between; Both thresholds are divided by the number of associated companies, so a second company can raise the rate on the first.; GOV.UK, Corporation Tax rates, read 2026-09-14 · next checked 2027-03-01
Employer National Insurance and the threshold it starts at.: 15% on earnings above a secondary threshold of £5,000 a year; A director paying themselves a salary pays this on top of income tax and employee NI.; GOV.UK, Rates and thresholds for employers, read 2026-09-14 · next checked 2027-03-01
Class 1 National Insurance deducted from an employee's pay.: Category A: 8% on earnings between £12,570 and £50,270, then 2% above; A director's National Insurance is worked out over the whole tax year rather than pay period by pay period, which is why a director's salary can be planned against the annual thresholds.; GOV.UK, rates and thresholds for employers 2026 to 2027, read 2026-09-15 · next checked 2027-03-01
The reduction in an employer's annual National Insurance bill.: £10,500; Not available to a company whose only employee is a single director.; GOV.UK, Rates and thresholds for employers, read 2026-09-14 · next checked 2027-03-01
Income tax rates and bands in England, Wales and Northern Ireland.: Nil to £12,570, 20% to £50,270, 40% to £125,140, then 45%; Scotland sets its own bands and rates.; GOV.UK, Income Tax rates and Personal Allowances, read 2026-09-14 · next checked 2027-03-01
Dividend income you can receive before tax.: £500; GOV.UK, Tax on dividends, read 2026-09-14 · next checked 2027-03-01
Tax rates on dividends above the allowance.: Basic 10.75%, higher 35.75%, additional 39.35%; The basic and higher rates rose for 2026 to 2027. Any salary-versus-dividend sum built on the old numbers is out of date.; GOV.UK, Tax on dividends, read 2026-09-14 · next checked 2027-03-01
How the personal allowance is withdrawn above £100,000.: £12,570, reduced by £1 for every £2 of adjusted net income above £100,000, and nil at £125,140; Produces an effective 60% marginal rate on income between £100,000 and £125,140 in England, Wales and Northern Ireland. Scottish rates differ.; GOV.UK, Income Tax rates and Personal Allowances, read 2026-09-14 · next checked 2027-03-01

How we work the numbers

A small home-office desk beside a sash window in an ordinary British house.

Questions

What directors actually ask about this

Why does your answer differ from every other salary and dividend calculator?

Almost all of them assume you can claim the Employment Allowance, which is £10,500 off your employer National Insurance bill. On that assumption a salary at the personal allowance costs the company nothing in NI, so that is what they recommend.

But not available to a company whose only employee is a single director. If you are your company's only employee and its only director — which describes a very large share of the people asking this question — you cannot claim it, and that salary does cost you employer NI. The box on this page is unticked by default for that reason.

Should I just take everything as dividends?

Usually not, and the reason is that the two are taxed in different places. A salary is an expense of the company, so it reduces the profit corporation tax is charged on. A dividend is paid out of profit that has already been taxed — 19% up to £50,000, 25% above £250,000, with marginal relief in between.

So a pound of salary is relieved once and taxed once, while a pound of dividend is taxed at the company and again in your hands. Taking no salary at all also means no qualifying year towards the State Pension, which this calculator does not price and you should not ignore.

What is marginal relief, and why does it matter here?

Corporation tax is 19% up to £50,000, 25% above £250,000, with marginal relief in between. Between the two thresholds the relief tapers away as profit rises, which means every extra pound of profit in that band is taxed at about 26.5 per cent — higher than the 25 per cent headline rate.

A calculator that applies a flat rate through that band gets the salary-versus-dividend comparison wrong precisely where a lot of these companies sit. This one models the relief.

Both thresholds are divided by the number of associated companies, so a second company can raise the rate on the first.

Does this account for my pension, student loan or Scottish rates?

No, and it says so rather than quietly leaving them out. It does not model pension contributions, student loan repayments, Scottish income tax rates, benefits in kind, other income, or associated companies.

Each of those needs a question this page does not ask, and every one of them can change the answer. A pension contribution in particular is often the single largest lever a director has, and it interacts with the £100,000 threshold. Half an answer on tax is worse than none, so we have drawn the boundary and stated it.

Can I rely on this?

Treat it as arithmetic you can check, not as advice. Every rate it uses is listed further up this page with the gov.uk page it was read from and the date it was read, so you can verify any of it.

What it cannot do is see your whole position. Before you change how you pay yourself, put it to your accountant — the cost of that conversation is small against the cost of getting this wrong for a year.

The Swealth letter

One letter a week, on Thursday

Plain writing about British money, including the thresholds that move without anyone announcing them.