UK Director Salary + Dividend Optimiser 2026/27: £5k vs £12,570 Strategy
UK Ltd company director salary and dividend optimiser for 2026/27 - compares a £5,000, £12,570 or custom salary after Corporation Tax, NI and dividend tax.
Your scenario
After business expenses, before any director salary or Corporation Tax.
Not available if the sole director is the only employee paid above the Secondary Threshold.
Strategy comparison
All three strategies extract as much as possible from the company subject to the salary level set. Remaining post-CT pot extracted as dividends.
Key 2026/27 rules used in this calculator
| Tax / threshold | 2026/27 value | Source |
|---|---|---|
| Corporation Tax small profits rate | 19% | Profits up to £50,000 - unchanged since April 2023 |
| Corporation Tax main rate | 25% | Profits over £250,000 |
| Marginal Relief band | £50,000-£250,000 | Effective marginal rate 26.5% on profits above £50,000 |
| Employer NI rate | 15% | Up from 13.8% in April 2025 |
| Secondary Threshold (employer NI starts) | £5,000 | Down from £9,100 in April 2025 |
| Employment Allowance | £10,500 | Up from £5,000 in April 2025. Not available where the sole director is the only employee paid above the Secondary Threshold. |
| Personal Allowance | £12,570 | Frozen through 2030/31 |
| Dividend Allowance | £500 | Taxed at 0%, but still counts towards your tax bands |
| Dividend tax: basic rate | 10.75% | Up 2 points from 6 April 2026 (Autumn Budget 2025) |
| Dividend tax: higher rate | 35.75% | Up 2 points from 6 April 2026 (Autumn Budget 2025) |
| Dividend tax: additional rate | 39.35% | Unchanged |
The three strategies explained
£5,000 salary
At the £5,000 Secondary Threshold - no employer NI, and below the Personal Allowance so no Income Tax or employee NI. But it is below the £6,708 Lower Earnings Limit, so the year does not count towards the State Pension through this salary. In this calculator it nets less than a £12,570 salary at every profit level, with or without Employment Allowance.
£12,570 salary
Full Personal Allowance used. Employer NI on £7,570 (£12,570 - £5,000) at 15% = £1,135.50 a year. The extra salary and its employer NI are deductible for Corporation Tax, which outweighs the NI cost; with Employment Allowance the NI is covered (the £10,500 allowance covers the NI on about 9 salaries of this size). Earnings above the Lower Earnings Limit also give a qualifying year for the State Pension.
Custom salary
Useful for testing higher salaries - for example £50,270 - to see how employee NI at 8% and employer NI at 15% compare with the Corporation Tax and dividend tax saved. Any salary of at least £6,708 gives a State Pension qualifying year.
Caveats + what this does NOT model
- Pension contributions via company are typically the most efficient extraction route - the company gets CT relief AND no employee tax. Not modelled here; layer on with the pension contribution calculator.
- Director loan account withdrawals: a close company owes a charge under Section 455 CTA 2010 at the dividend upper rate on a loan to a participator, due 9 months and one day after the end of the accounting period (relief if the loan is repaid). Not modelled.
- Optimum changes with profit level. Salary saves Corporation Tax at the company's marginal rate, which is lower at the 19% small profits rate. Check your own figures above rather than assuming one salary always wins.
- Multi-shareholder family Ltds where a spouse genuinely owns shares can pay dividends to both, using both Personal Allowances and dividend allowances. Not modelled.
- National Living Wage and directors. GOV.UK lists company directors among those not entitled to the minimum wage. If you also have an employment contract with the company, check whether it applies: the National Living Wage is £12.71 an hour from April 2026, about £24,785 a year at 37.5 hours a week.
- Not tax advice. Direct extraction decisions should be made with an accountant who knows your specific company structure, profit trajectory + personal circumstances.