Salary vs dividend

You have a profit in the company and you want it in your own pocket. Some of it has to come out as salary, the rest as dividends. This works out which split leaves you with the most, after Corporation Tax, National Insurance and your own income tax.

Your figures

Company profit before your salary

Profit for the year before taking anything yourself.

Your other personal income

Rent, a pension, another job. Leave at nil if there is none.

A salary of your own to compare

Added to the table alongside the usual levels.

Tax year

Claim the Employment Allowance A company whose only employee is a single director does not qualify. Leave this unticked if that is you.

Every salary level compared

Highlighted row leaves you with the most.

Where the profit goes on the best option

You keep Corporation Tax Income tax and dividend tax National Insurance

Why the answer usually lands on a low salary

Salary is deductible for Corporation Tax, so every pound of it saves the company tax. But salary also carries employee National Insurance at 8 per cent and employer National Insurance at 15 per cent, and it is taxed as ordinary income. Dividends carry no National Insurance at all, but they are paid out of profit that has already borne Corporation Tax.

The usual landing spot is a salary somewhere around the National Insurance thresholds, with the rest taken as dividends. Where exactly depends on your other income, whether the Employment Allowance is available, and whether the company is in the marginal relief band.

This does not model an employer pension contribution, which is often more efficient than either salary or dividends because it is deductible for Corporation Tax and carries no National Insurance. It is deferred money rather than cash now, which is why it sits outside a take-home comparison. Worth a conversation.