Director salary vs dividend optimiser
The most tax-efficient director pay split usually combines a salary near the personal allowance with dividends, taxed at 10.75% after a £500 dividend allowance, under gov.uk's tax on dividends rules. This finds the split estimated to leave the most after corporation tax, dividend tax and National Insurance.
Where does the profit go?
| 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 |
| Estimated take-home | £46,091 |
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, under gov.uk's Corporation Tax rates. 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, set out on gov.uk's tax on dividends page, which stack on top of any salary already taken.
What salary is most efficient?
A salary near the personal allowance is usually best for a sole director. Going higher brings in employee National Insurance and, because a single-director company cannot claim the Employment Allowance, employer National Insurance under gov.uk's Employment Allowance eligibility rules. Those costs tend to outweigh the extra corporation tax saved, so the balance is generally better taken as dividends.
What would I take home on a £60,000 profit?
On a £60,000 profit the optimiser estimates a £12,570 salary. Estimated employer National Insurance on that is £1,136, and both come off the profit before an estimated corporation tax of £8,796. That leaves £37,499 paid out as dividends, with an estimated dividend tax of £3,977. The estimated take-home is £46,091, with 23.2% of the profit estimated to be 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.
Where does the profit go?
Starting from company profit, a salary is drawn first, then employer National Insurance is paid on the salary above the secondary threshold. What remains is charged corporation tax, and the balance is paid out as dividends, which are then taxed personally. On a £60,000 profit this leaves an estimated £46,091 take-home after every stage.
What would I take home on a £60,000 profit?
On a £60,000 profit split optimally between a £12,570 salary and £37,499 of dividends, the estimated take-home is £46,091. That is after estimated employer National Insurance of £1,136, corporation tax of £8,796 and dividend tax of £3,977, an estimated total tax take of 23.2%.
Sources & Rate Verification
Rates verified against official statutory guidance on 6 September 2026.