Salary vs Dividends 2026/27: A Guide for Company Directors
How directors should think about salary, dividends, Corporation Tax, National Insurance, pensions, and distributable profits in 2026/27.
Last reviewed: 23 June 2026
The decision is not just tax rate comparison
Salary can create PAYE and National Insurance costs, but it may also support pension contributions, mortgage evidence, and benefit entitlement. Dividends avoid National Insurance but can only be paid from distributable profits after Corporation Tax.
Common director pattern
Many owner-directors use a modest salary plus dividends, then revisit the numbers each tax year. The right mix depends on other income, company profits, Employment Allowance eligibility, pension plans, student loans, and cash needs.
Where advice is valuable
Get advice where profits are rising, income is near a tax threshold, you want to make pension contributions, the company has multiple shareholders, or dividends may not be covered by distributable reserves.