Limited company
Salary and dividends: the best director’s salary for 2026/27
Three salary levels keep coming up for one-person companies; the engine tests every level in between as well.
For a sole director whose company makes £60,000 before their pay, the salary that leaves the most cash in 2026/27 is £12,570, giving £46,091 after all taxes when the rest is paid as dividends. A salary of £6,708, the lower earnings limit, leaves £45,530, and £5,000, the point where employer National Insurance starts, leaves £45,294. The Personal Allowance level wins even though the company pays employer National Insurance at 15 % on the slice above £5,000, with no Employment Allowance to absorb it when the director is the only employee. The reason is that salary is deductible for Corporation Tax and, up to £12,570, carries no employee National Insurance or Income Tax, while the same money paid as a dividend would bear Corporation Tax first. Any salary from £6,708 also keeps the year on your National Insurance record.
Director’s salary: which level leaves you most?
Best salary
£12,570
| Salary £0 | £44,111 |
| Salary £5,000 | £45,294 |
| Salary £12,570 | £46,091 |
| Best: £12,570 | £46,091 |
Cash to you when every pound left after Corporation Tax is paid out as dividends, sole director, no Employment Allowance.
Figures checked by Radif Partners · Editorial policy · How we calculate
Five salaries at four levels of profit
Each cell is the cash the director ends up with when every pound left after Corporation Tax is paid out as a dividend. The last line is the salary the engine finds best after testing every level in steps of £50.
| Salary | Profit £30,000 | Profit £60,000 | Profit £100,000 | Profit £150,000 |
|---|---|---|---|---|
| £0 | £23,093 | £44,111 | £63,606 | £84,715 |
| £5,000 | £23,941 | £45,294 | £64,457 | £85,321 |
| £6,708 | £24,045 | £45,530 | £64,627 | £85,274 |
| £12,570 | £24,403 | £46,091 | £65,210 | £85,110 |
| £20,000 | £23,576 | £45,187 | £64,667 | £84,308 |
| Best found | £12,570 | £12,570 | £12,570 | £5,000 |
A salary of £20,000 is worse everywhere: above £12,570 the director starts paying employee National Insurance at 8 % and Income Tax at the basic rate, while a dividend of the same cost pays only Corporation Tax and 10.75 %. In this engine the Personal Allowance salary is best from about £14,000 of profit up to about £127,000.
The arithmetic of the last £5,862
Moving from £6,708 to £12,570 adds £5,862 of salary. The company pays £879 more employer National Insurance, but both the salary and that National Insurance come off its taxable profit, so Corporation Tax drops by £1,509. The director receives the £5,862 free of Income Tax and employee National Insurance and takes fewer dividends, yet the dividend tax rises by £68: with the lower salary, the unused part of the Personal Allowance was covering dividends instead. Net effect on £60,000 of profit: £562 more in the director’s pocket.
No Employment Allowance for one director
Eligible employers can take up to £10,500 off their employer National Insurance bill each year. GOV.UK excludes a company whose only director is also the only employee liable for secondary Class 1 contributions (Employment Allowance eligibility). Taking on an employee paid above £5,000 takes the company out of that exclusion. Without the allowance, every pound of salary above £5,000 costs the company 15 % more, which the table already includes.
Paying the salary
A salary means a PAYE scheme. Directors pay National Insurance on their annual earnings rather than period by period, so a single payment at the year end and twelve monthly payments give the same contributions. The salary must be reported to HMRC on each payroll run. Dividends are paid separately, after a directors’ meeting, and taxed through Self Assessment; the dividend tax calculator shows how they stack on top of the salary.
Secondary threshold £5,000, lower earnings limit £6,708, primary threshold £12,570, employer rate 15 %, employee rate 8 % (HMRC rates and thresholds for employers).