Source: https://rivet.global/blog/salary-vs-dividends-uk-director
Published: 2026-06-17 · Updated: 2026-06-17 · By William Sunjo M.

# Salary vs dividends for UK company directors in 2026/27

How UK directors pay themselves in 2026/27: the usual £12,570 salary, dividend tax at 10.75% and 35.75%, employer NIC, Corporation Tax and when to leave money in.

## Key takeaways

- A salary is a cost for the company, so it saves Corporation Tax, but it can attract National Insurance.
- Dividends are paid from profit after Corporation Tax and carry no National Insurance.
- From 6 April 2026 dividend tax is 10.75% at the basic rate and 35.75% at the higher rate, with a £500 allowance.
- Many single-director companies pay a salary of £12,570, using the personal allowance, then take dividends.
- Dividends need distributable profit and paperwork; taking money without either creates a director's loan.

If you own and run a small UK limited company, you can pay yourself a salary, dividends, or both. The mix changes how much tax you and the company pay. This guide uses the rates for the tax year that started on 6 April 2026. It shows the usual approach and why it works, but it is not personal tax advice: your other income changes the answer.

## Why is there a choice at all?

A salary is an expense of the company. It reduces the company's taxable profit, so it saves Corporation Tax, but salary over certain thresholds carries employer and employee National Insurance. A dividend is a share of profit paid after Corporation Tax. It carries no National Insurance, but it is taxed at dividend rates in your hands.

## What are the 2026/27 rates?

| | Rate or threshold |
|---|---|
| Personal allowance | £12,570 |
| Employee NI primary threshold | £12,570 a year |
| Employer NI threshold | £5,000 a year |
| Employer NI rate | 15% |
| Dividend allowance | £500 |
| Dividend tax, basic rate | 10.75% |
| Dividend tax, higher rate | 35.75% |
| Dividend tax, additional rate | 39.35% |
| Corporation Tax | 19% up to £50,000 profit, 25% over £250,000, marginal relief in between |

The basic and higher dividend rates each rose two points on 6 April 2026. Employer National Insurance went to 15% with a £5,000 threshold in April 2025.

## What salary do most directors take?

For a company where the director is the only employee, the common choice is a salary of £12,570.

At that level there is no Income Tax and no employee National Insurance. The company pays employer National Insurance on the part above £5,000, which is £7,570 × 15% = £1,135.50. Both the salary and that NI are deductible, so at a 19% Corporation Tax rate they save about £2,604 of Corporation Tax. The net effect is positive, and a salary over the lower earnings limit also counts towards your State Pension.

Some directors take a salary of £5,000 instead, avoiding employer NI entirely. Others, in companies with a second employee that qualify for the Employment Allowance, take more. A company where the director is the only person paid a salary cannot claim the Employment Allowance.

## How are dividends taxed on top?

Your salary uses your personal allowance, so dividends are taxed from the first pound after the £500 dividend allowance. Dividends inside the basic-rate band (up to £50,270 of total income) are taxed at 10.75%. Above that, 35.75%.

A worked example for 2026/27, with no other income:

| | Amount |
|---|---|
| Salary | £12,570 |
| Dividends | £37,700 |
| Total income | £50,270 |
| Dividend allowance | £500 at 0% |
| Remaining dividends | £37,200 at 10.75% = £3,999 |

That keeps the director just inside the basic-rate band. Any further profit can stay in the company, taxed at the Corporation Tax rate, until a later year or a different use.

## What paperwork does a dividend need?

1. Up-to-date accounts showing enough distributable profit after Corporation Tax.
2. A board decision recorded in minutes.
3. A dividend voucher for each shareholder showing date, company, shareholder, amount.
4. The payment from the company account to the shareholder.

Paying a dividend the company cannot cover is unlawful and may have to be repaid. Money taken without either a salary run or a declared dividend sits on the director's loan account instead.

## Should profit stay in the company?

If you do not need it, leaving profit in the company defers personal tax. The company can use it for growth, hold it as a buffer, or pay it out in a year when your other income is lower. Many directors keep that buffer in more than one currency if they earn from clients abroad, so a payment in dollars does not have to be converted the day it arrives.

## Where Rivet fits

Rivet opens business accounts for registered companies. A UK Ltd can [hold GBP, USD and EUR](/accounts) in the company's name, pay salaries and dividends to UK accounts by Faster Payments, and keep overseas income in its original currency until the directors decide what to do with it.

## Questions

### What is the most tax-efficient director salary for 2026/27?

For many single-director companies it is £12,570, which uses the personal allowance with no Income Tax or employee National Insurance. The company pays employer National Insurance above £5,000, but that cost and the salary reduce Corporation Tax. Where the Employment Allowance applies, a higher salary can work. Your accountant should check your case.

### Can I pay myself only in dividends?

Yes, if the company has distributable profits. You lose the Corporation Tax saving a salary gives, and a salary above the lower earnings limit builds your State Pension record, so most directors take some salary.

### How often can a company pay dividends?

As often as the directors decide, as long as there is enough distributable profit each time and each dividend is recorded in board minutes with a voucher for each shareholder.

### What happens if I take money out that is not salary or dividends?

It goes on a director's loan account. If more than £10,000 is outstanding it can be a taxable benefit, and if it is not repaid within nine months of the year end the company owes a temporary tax charge on it.