A company director taking money out can choose salary, dividends, or a mix. Enter the profit you want to extract and your chosen salary, and see the total tax — Corporation Tax, NI, Income Tax and dividend tax — for the optimal split.
Salary vs dividends
If a director took everything as salary, it would be hit by Income Tax and both employee and employer National Insurance. Dividends are different: they carry their own lower rates and no National Insurance at all. But you can't skip salary entirely — a small salary uses your tax-free Personal Allowance, is an allowable expense that reduces Corporation Tax, and keeps your State Pension record ticking.
| Dividend band | 2026/27 rate |
|---|---|
| Dividend allowance | £500 (0%) |
| Basic rate | 8.75% |
| Higher rate | 33.75% |
| Additional rate | 39.35% |
Dividends can only be paid from post-Corporation-Tax profit, so the company tax bill comes first. Model that on the corporation tax calculator, check the personal dividend tax on the dividend tax calculator, and see the full day-rate-to-take-home journey on the contractor take-home calculator.
A small salary plus dividends is usually best. Salary uses your allowance and cuts Corporation Tax; dividends carry lower rates and no NI.
Commonly £12,570 to use the full Personal Allowance, or the NI thresholds. The optimum depends on Employment Allowance eligibility.
First £500 free, then 8.75% / 33.75% / 39.35% across the bands, with no NI.
No — dividends can only come from retained, post-tax profit. Paying illegal dividends can be clawed back.
