Question 1

What is the most tax-efficient director salary for 2026/27?

Accepted Answer

For a solo director with no other employees (and so no Employment Allowance), the conventional answer is £12,570 — equal to the personal allowance. This uses the full PA against salary (which would otherwise be wasted), creates a corporation-tax-deductible expense, and avoids paying personal income tax on the salary. The cost is employer NI of £1,136/yr on the £7,570 above the £5,000 secondary threshold — but this is itself corporation-tax-deductible. See the full breakdown in our optimal director salary guide.

Question 2

Why not just take £6,708 (the Lower Earnings Limit) for NI credit?

Accepted Answer

£6,708 (the 2026/27 Lower Earnings Limit) is the minimum salary that counts toward your State Pension qualifying year, while incurring zero employer NI (it's below the £5,000 secondary threshold) and zero employee NI. The catch: you lose the corporation-tax deduction on the £5,862 difference between £6,708 and £12,570. At 25% main-rate corporation tax, that costs the company about £1,466 in extra CT, which exceeds the £1,136 employer NI saving. £12,570 wins on net.

Question 3

When does the £9,100 salary breakpoint make sense?

Accepted Answer

£9,100 was the 2024/25 secondary threshold — taking exactly this salary used to mean zero employer NI and using the State Pension threshold. After April 2025 the secondary threshold dropped to £5,000, so this breakpoint no longer avoids employer NI. £9,100 still sits below the personal allowance so it incurs no income tax, but it wastes £3,470 of unused personal allowance. Rarely the optimal choice today.

Question 4

Does Employment Allowance change the optimal salary?

Accepted Answer

Yes, significantly. If your Limited Company has at least one other employee (not just the sole director), it qualifies for the £10,500 Employment Allowance, which wipes out the first £10,500 of employer NI for the year. With EA available, a higher salary often becomes optimal — typically around £42,000 if EA fully covers the resulting employer NI, because the corporation-tax deduction on the additional salary outweighs the personal income tax cost. See the EA-specific guide.

Question 5

Can I take £0 salary and only dividends?

Accepted Answer

Yes, but it's usually inefficient. £0 salary wastes the entire £12,570 personal allowance (you can't use it against dividends — the dividend allowance is a separate £500). It also means you don't accrue a qualifying year toward State Pension. The only common case where £0 salary makes sense: you have other PAYE income (e.g., a part-time job) that already uses the personal allowance and creates a NI qualifying year independently.

Question 6

Do I pay employer NI on my own director salary?

Accepted Answer

Yes — directors are treated as employees of their own company for NI purposes. For 2026/27, the company owes employer NI at 15% on salary above the £5,000 secondary threshold. At £12,570 salary, that's (£12,570 − £5,000) × 15% = £1,136. This is paid by the company, not you personally, and it reduces taxable profit (so it saves 25% in corporation tax — net cost about £852).

Salary	Dividends	Corp Tax	Personal Tax	Net Annual
£0 (no salary)	£91,950	£28,050	£23,393	£68,557
£6,708 (NI lower threshold)	£86,831	£26,204	£21,820	£71,976
£9,100 (optimal small co.)	£84,809	£25,476	£21,456	£73,069
£12,570 (personal allowance)Highest take-home	£81,876	£24,418	£20,928	£74,654

Salary	Dividends	Corp Tax	Personal Tax	Net Annual
£0 (no salary)	£91,950	£28,050	£23,393	£68,557
£6,708 (NI lower threshold)	£86,831	£26,204	£21,820	£71,976
£9,100 (optimal small co.)	£84,809	£25,476	£21,456	£73,069
£12,570 (personal allowance)Highest take-home	£81,876	£24,418	£20,928	£74,654

Director salary calculator: find your optimal salary.

How this calculation works

Common questions.