If you run your own limited company, how you pay yourself — salary, dividends, or a mix — changes your tax bill by thousands. Enter how much you want to draw from the company and we’ll compare each salary/dividend split across Corporation Tax, dividend tax and National Insurance, and show what actually lands in your pocket.
The amount you draw is treated as pre-tax profit: salary (and its employer NI) come out first, then Corporation Tax at the rate you pick, and the rest is paid as dividends. Models rest-of-UK rates, employer NI (15% over £5,000), employee NI, income tax on salary and dividend tax (8.75/33.75/39.35% after the £500 allowance). This is general guidance, not financial or tax advice — confirm with a qualified accountant.
Two forces decide the best split. First, salary is deductible from Corporation Tax but carries National Insurance, while dividends avoid NI but are paid from post-tax profit and carry dividend tax (8.75% in the basic band, 33.75% higher). Second, a salary of at least £6,708 — the Lower Earnings Limit — earns a qualifying year towards your State Pension, even though no NI is actually due until £12,570. In 2026/27 a £12,570 salary is the most tax-efficient choice for most directors; the lower salaries mainly help when you can’t use the Corporation Tax relief, want to minimise employer NI, or have other income that would tax extra salary heavily.
| Salary level | What it does | When it tends to win |
|---|---|---|
| £12,570 | Uses your whole tax-free personal allowance and pays no employee NI; every pound is Corporation-Tax-deductible. A sole director’s company pays about £1,136 employer NI on it. | Best in almost all cases in 2026/27 — and by the widest margin when you can claim the £10,500 Employment Allowance, which wipes out the employer NI. |
| £6,708 | Sits exactly on the Lower Earnings Limit, so it still earns a State Pension qualifying year while keeping employer NI to about £256 (15% of the £1,708 above £5,000). | When you want the pension year with minimal employer NI, the company has little taxable profit to relieve, or other income would tax extra salary at a higher rate. |
| £5,000 | Exactly at the secondary threshold, so zero employer NI. Any unused allowance is taken as dividends (8.75%) instead of tax-free salary. | When you want no employer NI and don’t need a State Pension year — or other income already fills your tax-free and basic-rate bands. |
| £0 | All dividends — no NI anywhere, but no Corporation Tax deduction and no pension credit. | Rarely best; mainly when another job already uses your personal allowance and NI band. |
| All salary | Avoids dividend tax, but pays income tax plus employee and employer NI on the lot, with no benefit from the lower dividend rates. | Almost never the cheapest — shown for contrast, or where you simply prefer no dividends and less admin. |
A State Pension qualifying year needs salary at or above the £6,708 Lower Earnings Limit. Company pension contributions are a further route that avoids both NI and dividend tax — often the most efficient option above the basic-rate band. Always confirm your own position with an accountant.
For most limited-company directors a small salary plus dividends is the most tax-efficient mix, because dividends avoid National Insurance and are taxed at lower rates. The calculator finds the split that leaves you with the most.
Common choices are £12,570, which uses the full Personal Allowance, or a lower figure where you cannot claim the Employment Allowance. The tool compares the usual options and shows which keeps the most after all taxes.
After a £500 tax-free dividend allowance, dividends are taxed at 8.75% for basic-rate, 33.75% for higher-rate and 39.35% for additional-rate taxpayers, with no National Insurance to pay.
These results are estimates for general information only and are not financial advice. Check every figure yourself and seek appropriate advice from a qualified professional before making any decision. Read the full disclaimer.