Optimal Director Salary for 2026-27

What is the optimal director salary for 2026-27?

For most solo directors with no other employees, the optimal salary sits at one of two levels:

• £12,570 — the personal allowance threshold. No income tax is due. Employee NI is zero below the £12,570 primary threshold. Employer NI applies at 15% on earnings above £5,000, but this is offset by the corporation tax deduction on salary cost.
• £9,100 — the secondary NI threshold if Employment Allowance is not available. Employer NI kicks in above £5,000 from April 2025, so the true break-even depends on your corporation tax rate.

Why £12,570 is generally best

Paying yourself £12,570 costs the company £12,570 + employer NI on the amount above £5,000. Employer NI = (£12,570 − £5,000) × 15% = £1,135.50. Total cost to company: £13,705.50.

That whole amount is a deductible expense. At 19% corporation tax, the saving is £2,604. Net cost after CT saving: £11,101.50 — to put £12,570 in your pocket. That's efficient.

Compare: taking the same £12,570 as dividends means first paying corporation tax on the profit, then dividend tax. The salary route wins at this level.

When £9,100 makes sense

If you have another employee using the Employment Allowance (£10,500 for 2026-27), employer NI on your salary is effectively free up to that allowance. In that case, pushing salary higher — up to the personal allowance — is even more tax-efficient.

If you are the only employee and cannot claim Employment Allowance (sole director companies are excluded), employer NI on salary above £5,000 is a real cost. Some accountants recommend £9,100 to avoid this — but even then, the CT deduction on the salary usually makes £12,570 the better choice. Use the Salary vs Dividend calculator to model your specific figures.

The key principle

Director salary is tax-deductible. Dividends are not. Always model the combined picture — salary cost + employer NI − corporation tax saving + dividend tax — before deciding on your split.