Director salary vs dividend optimiser
A company director can pay themselves in salary, dividends, or a mix. This finds the split that leaves you with the most once corporation tax, dividend tax and National Insurance are all counted.
Where the profit goes
| Step | Amount |
|---|---|
| Company profit | £60,000 |
| Salary drawn | £12,570 |
| Employer National Insurance | £1,136 |
| Corporation tax | £8,796 |
| Dividends paid | £37,499 |
| Dividend tax | £3,977 |
| Your take-home | £46,091 |
How the split is worked out
The optimiser tests sensible salary levels and keeps the one that leaves you with the most after every tax. A small salary is paid first, which uses your personal allowance and, because it is a company cost, cuts the corporation tax bill. What is left of the profit is taxed at the corporation tax rate, then paid out as dividends. Those dividends get a £500 allowance and are then charged at the 2026/27 dividend rates, which stack on top of the salary you have already taken.
A salary near the £12,570 personal allowance is usually best for a sole director. Going higher brings in employee National Insurance at 8% and, because a single-director company cannot claim the Employment Allowance, employer National Insurance at 15% on pay above £5,000. Those costs tend to outweigh the extra corporation tax saved, so the balance is better taken as dividends.
Worked example
On a £60,000 profit the tool pays a £12,570 salary. Employer National Insurance on that is £1,136, and both come off the profit before corporation tax of £8,796. That leaves £37,499 paid out as dividends, taxed at £3,977. Your total take-home is £46,091, with 23.2% of the profit lost to tax across the company and personal bills combined.
Common questions
Why take a small salary and the rest as dividends?
A salary is a company expense, so it reduces the profit that corporation tax is charged on. Dividends are paid from profit after corporation tax but are taxed at lower personal rates than salary and carry no National Insurance. Most one-person companies pay a modest salary to use the personal allowance, then take the balance as dividends.
What salary is most efficient?
For a sole director with no other employees, a salary around the £12,570 personal allowance is usually best. It uses the tax-free allowance, triggers no employee National Insurance, and the whole salary reduces the corporation tax bill. In the example the optimiser picks a £12,570 salary.
What are the dividend tax rates for 2026/27?
After a £500 dividend allowance taxed at 0%, dividends are charged at 10.75% in the basic-rate band, 35.75% in the higher-rate band and 39.35% in the additional-rate band. The two lower rates rose by 2 percentage points from April 2026.
Can I claim the Employment Allowance?
No. A company whose only employee is a single director cannot claim the £10,500 Employment Allowance, so employer National Insurance at 15% applies to salary above the £5,000 secondary threshold. This tool assumes that position, which is why a very high salary is rarely worthwhile.
Is this financial advice?
No. This is a general estimate for a simple one-person company with no other income, pension contributions or reliefs. Your own position may differ, so check with an accountant before setting your salary and dividends.