Salary vs Dividends
Compare the most tax-efficient way to extract money from a small limited company — salary, dividends, or a combination.
£12,570 = Personal Allowance (no Income Tax or NI)
Corporation Tax
£9,012
Salary take-home
£12,570
Net dividends
£35,046
Total take-home
£47,616
Total tax paid (CT + IT + NI + dividend tax)£12,384
Effective overall tax rate20.6%
Breakdown
Company profit£60,000
Director salary−£12,570
Corporation Tax (19%)−£9,012
Available as dividends£38,418
Salary Income Tax£0
Salary NI£0
Dividend tax£3,372
Total in your pocket£47,616
A salary of £12,570 uses the full Personal Allowance without triggering Income Tax or employee NI, and is deductible from Corporation Tax. Dividends above the £500 allowance are taxed at 8.75% (basic), 33.75% (higher) and 39.35% (additional). This is an educational simplification — real optimisation also considers pension contributions, salary sacrifice, and the Annual Allowance. Seek professional advice.
Assumptions
Based on 2026/27 UK tax rules for England. Tax bands: 20% to £50,270, 40% to £125,140, 45% above. Personal Allowance £12,570 (tapered above £100,000). National Insurance 8% on earnings between £12,570 and £50,270, 2% above. This is an educational estimate — not financial advice.