Guide

How to pay yourself as a company director

Reviewed by Andy Smith, Director, Abbeygate AccountancyLast updated 16th October 2026

Quick answer

Most owner-directors pay themselves a small salary plus dividends, and often employer pension contributions too. Salary is a business expense but can carry National Insurance; dividends come out of profits after Corporation Tax and are taxed at 10.75%, 35.75% or 39.35% from April 2026. The best mix depends on your profits, other income and whether your company can claim the Employment Allowance.

The three main ways to take money out

Method	How it's taxed	Good to know
Salary	Income Tax and National Insurance through payroll	Deductible for Corporation Tax. Builds your State Pension record
Dividends	Dividend tax after a £500 allowance	Paid from profits after Corporation Tax. Needs proper paperwork
Employer pension contributions	Usually no Income Tax or National Insurance when paid in	Normally deductible for the company. Annual allowance limits apply

What changed for 2026/27?

Dividend tax rates rose by 2 percentage points for basic and higher rate taxpayers from 6th April 2026, to 10.75% and 35.75%.
Employer National Insurance is 15% above a £5,000 threshold, which affects how much salary is efficient.
The personal allowance stays at £12,570.

Why there isn't one right answer

The "best" salary depends on whether your company can claim the Employment Allowance (companies where the director is the only employee usually can't), whether you have other income, and how much you actually need to draw. Pension contributions, director's loans and the timing of dividends can all change the result.

Common mistakes we see

Taking dividends when the company doesn't have enough retained profit.
No dividend vouchers or board minutes.
An overdrawn director's loan account that triggers extra tax.
Copying last year's split without checking the new rates.

Frequently asked questions

What are the dividend tax rates for 2026/27?

10.75% basic rate, 35.75% higher rate and 39.35% additional rate, after the £500 dividend allowance.

Should a director take a salary?

Usually a small one, because it's tax deductible and protects your State Pension record. The right level depends on your company's situation.

Can my company pay into my pension?

Yes. Employer pension contributions are often one of the most tax-efficient ways to extract profit, within the annual allowance.

Who can work out my best salary and dividend split?

An accountant who looks at your profits, other income and plans for the year. We can match you with one.

Sources and further reading

This guide is general information for UK taxpayers and was correct when last reviewed. Tax rules change, so check your own position with a qualified adviser.