Salary or dividends in 2026/27

Salary and dividends face different taxes. Salary reduces company profit but can attract National Insurance. Dividends come from profit after corporation tax and have their own income tax rates. Compare what reaches you after both company and personal taxes.

Where the salary sits

The employer's National Insurance starts at the £5,000.00 secondary threshold at 15%, so a salary at that level costs the company nothing beyond the salary. It sits below the £6,708.00 lower earnings limit though, and a year below the limit is not a qualifying year for the State Pension. A salary at the lower earnings limit costs £256.20 of employer National Insurance for the year and buys the qualifying year. Whether that helps you depends on your National Insurance record. Going up to the £12,570.00 personal allowance costs more National Insurance than the extra corporation tax it saves for most companies, which the calculator below shows for your profit.

The Employment Allowance wipes out the first £10,500 of employer National Insurance, which makes a personal allowance salary free, but a company whose only employee is its director cannot claim it.

Marginal relief

Corporation tax is 19% up to £50,000.00 of profit and 25% from £250,000.00. In between, marginal relief pulls the bill down by three two-hundredths of the gap to the upper limit, which works out to an effective 26.5% on each pound in the band. Salary reduces profit, so at those profit levels each pound of salary saves 26.5p of corporation tax, not 25p.