Why is £12,570 the standard director salary?

It matches the Personal Allowance, so no Income Tax is due on it, and the employee NI Primary Threshold, so no employee NI. The company pays employer NI at 15% on the part above the £5,000 Secondary Threshold: £1,135.50. Employment Allowance (up to £10,500 in 2026/27) would cover that, but a company whose only director is the only employee liable for secondary Class 1 NI cannot claim it.

Is salary or dividend more tax-efficient at higher levels?

It depends on the Corporation Tax rate the company pays. Per £1 of pre-tax profit, extra salary in the higher-rate band (15% employer NI, 40% Income Tax, 2% NI) leaves about 50p. A higher-rate dividend (35.75%) leaves 52p if the profit was taxed at 19%, but 48p at the 25% main rate. In the basic-rate band dividends win (67p against 63p even at 25%); in the additional-rate band at the main rate, salary leaves 46p and dividends 45p. Use the calculator with your own salary and profit figures.

Should I keep some profits in the company instead?

Profit you leave in the company pays Corporation Tax (19% up to £50,000, 25% above £250,000, with marginal relief between) but no personal tax until you take it out. You can take it later in a lower-income year, or the company can make employer pension contributions. On a qualifying disposal or winding-up, Business Asset Disposal Relief taxes gains at 18% from 6 April 2026, up to a £1,000,000 lifetime limit, if the conditions are met.

What happens in the £100,000 to £125,140 Personal Allowance taper zone?

Above £100,000 of adjusted net income your Personal Allowance falls by £1 for every £2, to nil at £125,140. On the salary path the marginal personal rate is 62% (40% Income Tax on 1.5 times the extra income, plus 2% NI). On the dividend path, with a £12,570 salary, our engine gives 58.25%, because the lost allowance makes the salary taxable and pushes more dividends into the higher rate. Employer pension contributions or holding dividends over to a later year can keep income below £100,000.

Does my company need to pay Employer NI on the £12,570 director salary?

Yes, on the part above the £5,000 Secondary Threshold: at 15% that is £1,135.50 in 2026/27. A company whose only director is the only employee liable for secondary Class 1 NI cannot claim Employment Allowance, so that cost usually lands. The salary and the employer NI are both deductible for Corporation Tax, at 19% where profits are within the small profits rate.

What about pension contributions from the company?

Employer contributions paid by the company to a registered pension scheme are not taxed as the director's earnings and carry no employee or employer NI. HMRC's Business Income Manual (BIM46001 onwards) sets out when they are deductible for the company. They count towards the £60,000 Annual Allowance, with unused allowance from the previous 3 tax years available to carry forward. From 6 April 2027 most unused pension funds will count towards your estate for Inheritance Tax.

How accurate is this calculator?

It models Corporation Tax (with marginal relief), employer NI, employee NI, Income Tax (including Scottish rates and the allowance taper) and dividend tax at the published rates for the selected year, with Employment Allowance if you tick it. It does not model associated companies or short accounting periods, the Director's Loan Account, IR35, Business Asset Disposal Relief, pension contributions, payrolled benefits in kind or other income. Treat the result as a planning estimate and confirm specifics with an accountant.

£100,000 Salary vs Dividend UK 2026/27

Extracting £100,000 from your UK limited company in 2026/27. The tax-efficient mix - £12,570 director salary plus £87,430 in dividends - gives you £78,223 net to your personal bank account. Taking the full £100,000 as 100% salary instead would yield £68,557 - a £9,665 advantage for the mix (14.1%).

Tax-efficient mix

£78,223

£12,570 salary + £87,430 dividends

100% salary route

£68,557

£27,432 IT + £4,011 EE NI + £14,250 ER NI

Scotland (same mix)

£78,223

Dividend rates UK-wide; only PAYE differs

Tax stack on £100,000

Pre-tax company profit needed to fund £100,000 extraction: £127,556 (just enough to pay the salary, employer NI, Corporation Tax and the dividends, with nothing retained).
Director salary £12,570 and employer NI £1,136 are deducted as company expenses.
Corporation Tax on the remaining profit: £26,420 (effective 23.2%).
Distributable profit available for dividends: £87,430. Dividends declared: £87,430.
Personal taxes on the dividends: £21,777 dividend tax. Salary at £12,570 attracts £0 Income Tax and £0 employee NI (sits at the Personal Allowance / Primary Threshold).
Net to shareholder: £78,223. Combined effective tax rate: 38.7% of the £127,556 of pre-tax profit needed to fund this extraction.

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Your salary in context

ONS · HMRC · CPI

Optimum mix

Salary of £12,570 (Personal Allowance level) + dividends of £87,430 = £100,000 total extraction.
Net to shareholder

After Corporation Tax, employer NI, employee NI, Income Tax and Dividend Tax, you keep £78,223 in your personal bank account.
Effective tax rate

Combined personal + company taxes consume 38.7% of the £127,556 of pre-tax company profit needed to fund this extraction (Corporation Tax counted only on the profit paid out).
Corporation Tax

After deducting the £12,570 salary and £1,136 employer NI, profits chargeable to CT are £113,850 - CT due £26,420 (effective 23.2%).
Top dividend band

The top slice of your dividends falls in the Higher rate band - the rate paid on the marginal pound of dividend is 35.75%.
Salary + dividend vs salary-only

Taking £100,000 as 100% salary would yield £68,557 net - that's £9,665 more than the salary + dividend mix.
Employment Allowance

If your company qualifies for the £10,500 Employment Allowance (you need a second non-director employee), the £1,136 employer NI falls to £0 - a direct uplift to net.

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Frequently asked questions

Why is £12,570 the standard director salary?: It matches the Personal Allowance, so no Income Tax is due on it, and the employee NI Primary Threshold, so no employee NI. The company pays employer NI at 15% on the part above the £5,000 Secondary Threshold: £1,135.50. Employment Allowance (up to £10,500 in 2026/27) would cover that, but a company whose only director is the only employee liable for secondary Class 1 NI cannot claim it.
Is salary or dividend more tax-efficient at higher levels?: It depends on the Corporation Tax rate the company pays. Per £1 of pre-tax profit, extra salary in the higher-rate band (15% employer NI, 40% Income Tax, 2% NI) leaves about 50p. A higher-rate dividend (35.75%) leaves 52p if the profit was taxed at 19%, but 48p at the 25% main rate. In the basic-rate band dividends win (67p against 63p even at 25%); in the additional-rate band at the main rate, salary leaves 46p and dividends 45p. Use the calculator with your own salary and profit figures.
Should I keep some profits in the company instead?: Profit you leave in the company pays Corporation Tax (19% up to £50,000, 25% above £250,000, with marginal relief between) but no personal tax until you take it out. You can take it later in a lower-income year, or the company can make employer pension contributions. On a qualifying disposal or winding-up, Business Asset Disposal Relief taxes gains at 18% from 6 April 2026, up to a £1,000,000 lifetime limit, if the conditions are met.
What happens in the £100,000 to £125,140 Personal Allowance taper zone?: Above £100,000 of adjusted net income your Personal Allowance falls by £1 for every £2, to nil at £125,140. On the salary path the marginal personal rate is 62% (40% Income Tax on 1.5 times the extra income, plus 2% NI). On the dividend path, with a £12,570 salary, our engine gives 58.25%, because the lost allowance makes the salary taxable and pushes more dividends into the higher rate. Employer pension contributions or holding dividends over to a later year can keep income below £100,000.
Does my company need to pay Employer NI on the £12,570 director salary?: Yes, on the part above the £5,000 Secondary Threshold: at 15% that is £1,135.50 in 2026/27. A company whose only director is the only employee liable for secondary Class 1 NI cannot claim Employment Allowance, so that cost usually lands. The salary and the employer NI are both deductible for Corporation Tax, at 19% where profits are within the small profits rate.
What about pension contributions from the company?: Employer contributions paid by the company to a registered pension scheme are not taxed as the director's earnings and carry no employee or employer NI. HMRC's Business Income Manual (BIM46001 onwards) sets out when they are deductible for the company. They count towards the £60,000 Annual Allowance, with unused allowance from the previous 3 tax years available to carry forward. From 6 April 2027 most unused pension funds will count towards your estate for Inheritance Tax.
How accurate is this calculator?: It models Corporation Tax (with marginal relief), employer NI, employee NI, Income Tax (including Scottish rates and the allowance taper) and dividend tax at the published rates for the selected year, with Employment Allowance if you tick it. It does not model associated companies or short accounting periods, the Director's Loan Account, IR35, Business Asset Disposal Relief, pension contributions, payrolled benefits in kind or other income. Treat the result as a planning estimate and confirm specifics with an accountant.