Calculate the most tax-efficient salary for a company director in 2025/26. Find the optimal combination of salary and dividends to maximise take-home pay.
For 2025/26, the most popular director salary strategies are: (1) £12,570 (Personal Allowance level) — no income tax or employee NI for the director, but a small employer NI charge (13.8% above secondary threshold of £9,100 = ~£476). (2) £9,100 (Secondary NI threshold) — fully NI-free for both director and company. Many directors choose £12,570 because the income tax saving on salary funds the small NI cost through a CT deduction.
Directors can take dividends from company after-tax profits. The dividend allowance is £500 for 2024/25 onwards (reduced from £2,000 in 2022/23). Above the allowance, dividends are taxed at 8.75% (basic rate), 33.75% (higher rate), or 39.35% (additional rate). With a salary of £12,570, a director can take approximately £37,700 in dividends before hitting the higher rate boundary.
The 2025/26 corporation tax rates are: 19% on profits up to £50,000 (small profits rate); 25% on profits over £250,000 (main rate); and a marginal relief between £50,000-£250,000. For most owner-managed companies with one director, the small profits rate of 19% typically applies. Company CT must be paid within 9 months and 1 day of the year end.
Yes — there is no legal requirement for a director to take a salary. Some directors take no salary and only draw dividends. The disadvantage is no National Insurance record (affecting State Pension and benefits entitlement). If you take no salary at all, you need at least £6,396 of NI credits per year to build a qualifying year towards the State Pension — consider paying the minimum NI contribution (Class 3 voluntary NI).
The optimal strategy for most owner-managed companies (single director, no other income) is typically: Salary = £12,570 (personal allowance level) + Employer pension contributions (reducing CT) + Dividends up to the basic rate boundary (£50,270 total income) + Use ISA allowance (£20,000) to shelter dividends. This minimises income tax, NI, and corporation tax while maximising retained wealth.