**Take Home**

    Answer · 2025/26

# What is the most tax-efficient salary and dividend mix?

For most single-director companies in 2025/26, the efficient mix is a £12,570 salary (covering the personal allowance) with the remaining profit taken as dividends after Corporation Tax. Dividends avoid National Insurance and are taxed at 8.75%, 33.75% or 39.35%. The exact optimum shifts if you can claim Employment Allowance or have other income.

      CB

        [Charlie Bailey](https://www.linkedin.com/in/charliebaileyy/) · Founder, Take Home · 6 years in UK accountancy
        Published 2026-05-30 · Updated 2026-05-30 · 3-min read

    On this page
- [Try it yourself](#try)

      - [In detail](#detail)

      - [Related questions](#related-questions)

##

Key takeaways
- For most single-director companies in 2025/26, the efficient mix is a £12,570 salary (covering the personal allowance) with the remaining profit taken as dividends after Corporation Tax. Dividends avoid National Insurance and are taxed at 8...

## Try it yourself

  Dividend tax calculator (2025/26)

      Salary or other income (£)

      Dividends received (£)

    2025/26 dividend rates: 8.75% basic, 33.75% higher, 39.35% additional, with a £500 tax-free allowance. Dividends stack on top of your other income. Estimate, not advice.

## In detail

The logic is to use your cheapest allowances first, then take the rest in the form that carries the least tax.

A **£12,570 salary** uses the personal allowance, attracts no income tax, keeps your National Insurance record intact, and is deductible against Corporation Tax. Above that, **dividends** beat extra salary, because salary attracts employee and employer National Insurance while dividends attract neither. Dividends are then taxed at 8.75% up to £50,270 of total income, 33.75% to £125,140, and 39.35% above.

Two things change the optimum. If your company can claim **Employment Allowance** (most single-director companies cannot), a slightly higher salary becomes attractive. And if you do not need all the cash, leaving profit in the company or making a [pension contribution](/director-pension-tax-efficient) can beat extracting it. The [optimal director salary guide](/optimal-director-salary-2025-26) covers the edge cases.

## Related questions

- [Can I live abroad and run a UK limited company?](/ask/can-i-live-abroad-and-run-a-uk-limited-company)

- [Do I pay tax in Dubai as a UK citizen?](/ask/do-i-pay-tax-in-dubai-as-a-uk-citizen)

- [What is the Central Management and Control test?](/ask/what-is-the-central-management-and-control-test)

- [How do I pay myself as a limited company director?](/ask/how-do-i-pay-myself-as-a-limited-company-director)

- [How much tax will I pay as a contractor in the UK?](/ask/how-much-tax-will-i-pay-as-a-contractor)

- [How much pension can I pay as a company director?](/ask/how-much-pension-can-i-pay-as-a-director)

- [Should I go limited or stay a sole trader?](/ask/should-i-go-limited-or-stay-sole-trader)

- [What mortgage can I get on dividends only?](/ask/what-mortgage-can-i-get-on-dividends-only)

- [How do I prove my income for a mortgage when self-employed?](/ask/how-do-i-prove-my-income-for-a-mortgage-when-self-employed)

**Information, not advice.** Take Home provides information and calculations, not regulated financial or tax advice. Your circumstances may differ and the figures here are illustrative for the 2025/26 tax year. Speak to a qualified adviser or accountant before acting on anything you read here.

    Your situation

## Get the answer for your numbers, not the general case.

Take Home runs questions like this against your real income, so the answer is yours rather than a rule of thumb.

    [Join the waitlist →](/contact)

## Related guides

      [Guide

### What's the optimal director salary in the UK for 2025/26?

For most UK limited company directors with no other income, the most tax-efficient salary in 2025/26 is £12,570, the personal allo…](/optimal-director-salary-2025-26)
      [Guide

### Salary vs Dividends for UK Limited Company Directors (2025/26)

Limited company directors in the UK can extract company profit as salary, dividends, or pension. This guide compares salary vs div…](/salary-vs-dividends-2025-26)
      [Guide

### UK corporation tax calculator (2025/26)

UK corporation tax is 19% on profits up to £50,000 and 25% on profits over £250,000. Between those points, marginal relief produce…](/corporation-tax-calculator-uk)

    FAQ

## Frequently asked

      What is the most tax-efficient salary and dividend mix?

For most single-director companies in 2025/26, the efficient mix is a £12,570 salary (covering the personal allowance) with the remaining profit taken as dividends after Corporation Tax. Dividends avoid National Insurance and are taxed at 8.75%, 33.75% or 39.35%. The exact optimum shifts if you can claim Employment Allowance or have other income.

      Why take a £12,570 salary specifically?

Because it matches the personal allowance, so the salary is free of income tax, keeps your National Insurance record, and is deductible for the company. Above it, dividends are generally more efficient than extra salary.

      Do dividends count towards my tax band?

Yes. Dividends sit on top of your other income, so your salary determines which band the dividends fall into. A higher salary pushes more dividends into the 33.75% rate.

      Should I leave profit in the company?

Sometimes. If you do not need the cash, leaving profit in the company or making a company pension contribution can be more efficient than extracting it as dividends and paying dividend tax now.