How to Pay Yourself as a UK Company Director

Indicative only

The figures below are illustrative and assume you are a UK-resident director-shareholder outside Scotland, taking money only via salary and dividends. Before you set your remuneration policy, run it past your accountant.

The short answer

For most single-director limited companies in 2026/27, the most tax-efficient mix is a small salary of £12,570 topped up with dividends out of post-tax profit.

The salary uses your personal allowance, is a deductible expense for the company, and — importantly — keeps you earning qualifying years towards your State Pension. Dividends are then paid from what's left after Corporation Tax, at lower headline rates than salary.

Interactive calculator

Proposed salary per director (£/yr)

Number of directors on payroll

Other employees on payroll

Average salary per other employee (£/yr)

Estimated net profit before director pay (£/yr)

Company qualifies for the £10,500 Employment Allowance(not available to single-director companies with no other employee above £5,000)

Per director — personal

PAYE income tax (on salary): £0
Employee NI: £0
Dividend received: £52,476
Dividend tax (self-assessment): £9,282
Net cash in pocket: £55,765

Company

Total salaries paid: £12,570
Employer NI: £1,136
Taxable profit: £66,295
Corporation Tax: £13,818
Distributable reserves: £52,476

Indicative for 2026/27, rUK (non-Scottish) taxpayers, dividends split equally between directors, no other personal income, no student loan, no benefits in kind. Dividend rates are provisional pending Royal Assent of Finance Act 2026.

Salary

Reduces the company's Corporation Tax bill. Attracts employee and employer National Insurance above the thresholds.

Personal allowance: £12,570
Employee NIC starts at £12,570 (8%)
Employer NIC starts at £5,000 (15%)
Employment Allowance up to £10,500 (see traps)

Dividends

Paid out of distributable reserves — not just cash in the bank. No NIC, but no CT deduction either.

£500 dividend allowance at 0%
Basic rate: 10.75%
2026/27 provisional
Higher rate: 35.75%
Additional rate: 41.35%

Corporation Tax on what's left

Profits up to £50,000 are taxed at 19%. Profits above £250,000 at 25%. Between the two, marginal relief applies — the effective rate on the marginal slice is about 26.5%.

If your company has associated companies or a short accounting period, the £50k and £250k limits are shared or pro-rated.

Worked example — 2026/27

Two 50/50 directors, £120,000 profit before director pay, Employment Allowance available.

Salary: £12,570 each (£25,140 total)
Employer NIC: £2,271 → £0 after Employment Allowance
Taxable profit: £94,860 → Corporation Tax £21,388 (marginal relief applied)
Distributable: £73,472 → £36,736 dividend each
Dividend tax per director: £3,895
Net cash each: ~£45,411 (combined ~£90,821)

Compare this with taking the same £120,000 as pure salary — you'd end up with roughly £87,700 combined. The salary + dividend split saves about £3,100 across the two directors.

Common traps

1. Single-director Employment Allowance exclusion

If you are the only person on payroll above £5,000/yr, your company cannot claim the £10,500 Employment Allowance. Add a second qualifying employee and it reappears.

2. Dividends need distributable reserves

Cash in the account isn't enough. Dividends must come from accumulated post-tax profit (Companies Act 2006, Part 23). Illegal dividends can be clawed back.

3. The £50,270 cliff

Once your total income crosses £50,270, further dividends jump from 10.75% to 35.75%. Model whether you really need to cross it this year.

4. The 60% band between £100k and £125,140

Your personal allowance withdraws £1 for every £2 of income above £100,000, creating an effective 60% marginal rate. Pension contributions are often the fix.

5. £12,570 vs £5,000 — the pension point

A £5,000 salary sits below the Lower Earnings Limit and does not secure a State Pension qualifying year. £12,570 does, at no extra NIC cost.

6. Marginal Corporation Tax changes the maths

In the £50k–£250k band, every extra £1 of salary saves 26.5p of CT — not 19p. That makes salary relatively more attractive than the folk-wisdom suggests.

What we don't cover here (yet)

Scottish taxpayers (different salary bands, same dividend rates), employer pension contributions as an extraction route, salary sacrifice and benefits in kind, alphabet shares, and student loan deductions.

Any of these can shift the answer materially — talk to your accountant if they apply to you.

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Rates shown for 2026/27. 2026/27 dividend rates are provisional pending Royal Assent of Finance Act 2026.