Director Salary + Dividend Optimiser 2026/27
Compare salary-and-dividend extraction strategies for a UK Ltd company director given annual profit. Models Corporation Tax (19% small profits rate / 25% main rate / 26.5% marginal-relief slice), employer NI at 15% post-April-2025, Employment Allowance, plus personal Income Tax + employee NI + dividend tax at post-Autumn-Budget-2025 rates.
Your scenario
After business expenses, before any director salary or Corporation Tax.
Sole-director Ltd companies excluded from EA since 2016.
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 2023 |
| Corporation Tax main rate | 25% | Profits over £250,000 |
| Marginal Relief band | £50k-£250k | Effective rate 26.5% on the slice 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 - the biggest change for director extraction |
| Employment Allowance | £10,500 | Up from £5,000 in April 2025. NOT available to single-director Ltds. |
| Personal Allowance | £12,570 | Frozen through 2027/28 |
| Dividend Allowance | £500 | Tax-free first £500 of dividends |
| Dividend tax: basic rate | 10.75% | +2pp from Autumn Budget 2025 (was 8.75%) |
| Dividend tax: higher rate | 35.75% | +2pp from Autumn Budget 2025 (was 33.75%) |
| Dividend tax: additional rate | 39.35% | Unchanged |
The three strategies explained
£5,000 salary
Bang on the Secondary Threshold - zero employer NI. £5,000 saves CT at company rate (19-25% depending on profit band) and is below the £12,570 Personal Allowance so no employee Income Tax or NI either. Often the lowest-tax route for sole-director Ltds without Employment Allowance.
£12,570 salary
Full Personal Allowance used. Employer NI charged on £7,570 (£12,570 - £5,000) at 15% = £1,135.50/yr. CT saving on the salary often beats the employer NI cost, especially with Employment Allowance covering it (£10,500 absorbs ~9 director-only companies' worth). Optimal for multi-employee Ltd companies with EA.
Custom salary
Useful for testing higher salary scenarios - e.g. £50,270 to maximise basic-rate salary income before crossing into 40%, leaving headroom for higher-rate dividends. Or to test whether crossing into NI Upper Earnings Limit (£50,270) is worth it for State Pension qualifying years (it's already in via the £5,000 floor).
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 taxed under Section 455 ITTOIA at the higher dividend rate if not repaid within 9 months of year-end. Not modelled.
- Optimum changes with profit level. Below £50,000 profit at 19% small profits rate, salary saves less CT than at 25%. The £12,570 strategy often loses to £5,000 below ~£60,000 profit without Employment Allowance.
- Multi-shareholder family Ltds can split dividends between spouses to use both Personal Allowances + dividend allowances. Not modelled - see the spousal income shifting guide.
- National Living Wage rule for directors. If you sign an employment contract for the director role, NLW applies (£12.71/hr from April 2026 = £24,800/yr full-time). Most directors sign no contract = NLW doesn't apply.
- Not tax advice. Direct extraction decisions should be made with an accountant who knows your specific company structure, profit trajectory + personal circumstances.