theluckystrike

Salary vs dividends: the UK tax-efficiency question

UK company directors often split pay between a small salary and dividends. Salary is deductible for the company and builds NI record; dividends avoid NI but are paid from post-corporation-tax profit and taxed at dividend rates.

The efficient mix changes with the dividend allowance, the corporation-tax rate, and your total income band — there is no single right answer across all earnings levels.

Model the combined corporation tax + personal tax + NI for a few splits before deciding; the gap between a good and a poor split is real money.

Try it: UKMoneyCalc on salary dividends uk tax.