You run a limited company and it made a profit. Compare paying it all out as salary against the classic low salary + dividends route — corporation tax, National Insurance and dividend tax all included.
Profit before the director's salary, employer NI or dividends. Assumes one director, standard personal allowance, no other income, no student loan. Employment allowance not applied (sole-director companies don't qualify).
| Gross salary paid | — |
| Employer NI (company cost) | — |
| Income tax | — |
| Employee NI | — |
| Corporation tax (salary is fully deductible, so no profit is left to tax) | — |
| Salary (at personal allowance) | — |
| Employer NI (company cost) | — |
| Corporation tax | — |
| Dividends paid | — |
| Income tax on salary | — |
| Dividend tax | — |
Rates used are for the 2026/27 tax year as at publication: personal allowance £12,570 (tapered above £100,000 of income), basic rate 20% to £50,270, higher rate 40% to £125,140, additional rate 45%. Employee NI at 8% between £12,570 and £50,270 and 2% above. Employer NI at 15% above £5,000. Dividend allowance £500, dividend tax at 8.75% / 33.75% / 39.35%. Corporation tax at 19% up to £50,000 of profit, 25% above £250,000, with marginal relief between.
Route 2 pays a salary equal to the personal allowance — enough to earn a state pension qualifying year, at a small employer-NI cost — then distributes the remaining post-tax profit as dividends. Real situations have pensions, other income, student loans, spouses and retained profit, all of which move the answer.
This is a model, not advice. Talk to us before acting on it — the right answer depends on facts a calculator can't see.