How much salary should a director take in 2026/27?

If you run your own limited company, the salary question comes up every year: pay yourself a low salary and top up with dividends, or take a bigger salary? For most directors the answer settles on one figure, £12,570, but it's worth understanding why, and the cases where taking more actually pays off.

The short answer: £12,570

A salary of £12,570 lines up with the personal allowance, so you pay no Income Tax on it. It's also above the National Insurance lower earnings limit, which means the year still counts towards your state pension record. And because salary is a business expense, it reduces the profit your company pays Corporation Tax on.

You do trigger a little employer National Insurance at this level. Employer NI is 15% on pay above £5,000, so on £12,570 that's about £1,136 a year. But the salary and that NI are both deductible for Corporation Tax, so the real cost to the company is lower than it first looks. On balance, £12,570 gets money out of the company with almost no tax friction.

Why not just pay yourself entirely in salary?

Because salary is expensive to extract. On top of Income Tax at 20%, 40% or 45%, salary attracts employee NI and employer NI. Employer NI alone is 15% with no upper cap, so a £50,000 salary costs the company around £6,750 in employer NI before you've paid a penny of your own tax. Dividends avoid NI entirely on both sides and are taxed at lower rates (10.75%, 35.75%, 39.35% for 2026/27, after a 2-point rise in April 2026). That gap is the whole reason the low-salary-plus-dividends structure exists.

When taking a higher salary makes sense

The £12,570 default isn't right for everyone. Here are the situations where a bigger salary genuinely helps:

• You're applying for a mortgage soon. Lenders trust salary more than dividends, and a £12,570 salary won't get you far. Taking a higher salary for a year or two before you apply can lift your borrowing power, even though you pay more tax in the meantime.
• You want to make large personal pension contributions. Personal pension tax relief is capped at your relevant earnings, which for a director means salary, not dividends. A higher salary lets you contribute more personally. (Company pension contributions are a separate, often better, route.)
• Your company is loss-making. A salary creates or increases a loss you can carry forward against future profits, so the usual Corporation Tax logic flips.
• You're close to state pension age and short of qualifying years. You need 35 qualifying years for the full new state pension; a salary at or above the threshold protects the year.

What about £9,100 or the higher secondary threshold?

You'll still see older guidance suggesting a salary around £9,100. That was tied to the employer NI secondary threshold in previous years. From April 2026 the employer NI threshold sits at £5,000, which changes the fine detail but not the headline: £12,570 remains the common choice because it uses the full personal allowance and keeps the state pension year, and the small employer NI cost is usually outweighed by the Corporation Tax saving.

Running the numbers for your own company

The right salary depends on your profit, whether you have other income, and your plans for mortgages or pensions. The quickest way to see the effect is to model it. Put your salary and dividend figures into the dividend tax calculator and adjust the salary up or down to watch your personal tax and take-home change. For the full salary-versus-dividend picture at different profit levels, read our guide on the optimal split for 2026/27.

One caveat worth repeating: this is general information, not advice for your specific company. Rules around structured pay, IR35, and distributable profits can change what's sensible. A quick conversation with an accountant before you set your salary for the year is money well spent.