A director taking profit from their own company chooses how much arrives as salary and how much as dividends. Salary is deductible against corporation tax and carries both National Insurances; dividends are paid from taxed profit and carry none. The split that leaves the most is a single arithmetic answer, and it moved this year because dividend rates did.
The Ledger 1 of 6
Earn
Running a company, working for yourself, and income that does not land on the same day each month.
8 sourced figuresnext checked 1 March 2027Writing held
A lot of wealth writing assumes a salary on the 28th. Plenty of British households do not work that way. They invoice, they take dividends, they have a strong year and then a quiet one. The tax rules for that income are different from PAYE, they stack awkwardly, and the places they collide are rarely spelled out in plain language.
What this is not
This subject covers what your work earns and how the rules treat it. It does not cover hiring, sales, or how to run a company day to day.
What this subject contains
11 ways the rules work here
An annual reduction in an employer's National Insurance bill. A company whose only employee is a single director cannot claim it, which is the shape many owner-managed businesses take.
When the company pays the contribution directly, it is deductible against corporation tax, skips employer and employee National Insurance, and does not count as the director's income. That last point is why it feeds into the income thresholds in Keep.
A band of dividend income taxed at nothing before the dividend rates begin. It has been cut repeatedly and is now small enough that most people who receive dividends pass it in the first month of the tax year.
Corporation tax is not one rate. Between the small profits limit and the main rate limit, marginal relief produces an effective rate higher than either, so a pound of profit inside that band costs more than a pound above it.
A reduced rate of capital gains tax on qualifying disposals of a business, subject to a lifetime limit. The rate has risen twice in recent years, so any exit calculation built on an older figure now understates the bill.
Registration becomes compulsory once taxable turnover in any rolling twelve months passes the threshold. HMRC looks at a rolling year, so annual accounts alone can miss the trigger.
Small non-cash benefits an employer can provide with no tax, no National Insurance and no reporting. Directors of close companies have an annual cap that other employees do not.
Splitting income between two people can use two personal allowances and two basic-rate bands. It is common in owner-managed companies and often done without the paperwork HMRC expects.
A sole trader pays a different National Insurance structure from an employee, with its own thresholds and its own relationship to the State Pension record.
Self Assessment collects tax for the year ahead in two instalments, each sized on the year just gone. A first return can therefore ask for eighteen months of tax at once, and a good year is followed by payments sized for it whether or not the next year matches.
These are the ones that belong to this subject. The whole map, across all six, is on every key way to build wealth.
The figures underneath
What this subject rests on
Corporation tax on company profits.
19% up to £50,000, 25% above £250,000, with marginal relief in between
GOV.UK, Corporation Tax rates · Current rates · checked again by 2027-03-01
Both thresholds are divided by the number of associated companies, so a second company can raise the rate on the first.
The turnover at which VAT registration becomes compulsory.
£90,000 of taxable turnover in the last 12 months, or expected in the next 30 days
GOV.UK, When to register for VAT · Current threshold · checked again by 2027-03-01
Rolling 12 months, not your accounting year.
Employer National Insurance and the threshold it starts at.
15% on earnings above a secondary threshold of £5,000 a year
GOV.UK, Rates and thresholds for employers · 6 April 2026 to 5 April 2027 · checked again by 2027-03-01
A director paying themselves a salary pays this on top of income tax and employee NI.
The reduction in an employer's annual National Insurance bill.
£10,500
GOV.UK, Rates and thresholds for employers · 2026 to 2027 tax year · checked again by 2027-03-01
Not available to a company whose only employee is a single director.
Dividend income you can receive before tax.
£500
GOV.UK, Tax on dividends · 2026 to 2027 tax year · checked again by 2027-03-01
Tax rates on dividends above the allowance.
Basic 10.75%, higher 35.75%, additional 39.35%
GOV.UK, Tax on dividends · 6 April 2026 to 5 April 2027 · checked again by 2027-03-01
The basic and higher rates rose for 2026 to 2027. Any salary-versus-dividend sum built on the old numbers is out of date.
National Insurance for the self-employed.
Class 4 at 6% on profits from £12,570 to £50,270 and 2% above; Class 2 treated as paid once profits reach £7,105
GOV.UK, Self-employed National Insurance rates · 2026 to 2027 tax year · checked again by 2027-03-01
Below £7,105 you can pay voluntary Class 2 to protect your State Pension record.
The reduced capital gains rate when selling a business.
18% on qualifying disposals from 6 April 2026, up from 14% in 2025 to 2026 and 10% before that
GOV.UK, Business Asset Disposal Relief · Disposals from 6 April 2026 · checked again by 2027-03-01
The rate has risen twice in two years. Any exit plan built on 10% is out of date.
Written so far
Writing held
The 11 mechanisms above are stated and the 8 figures under them are in the ledger with sources and dates. Long-form articles are still in draft; nothing ships without a named reviewer, so we publish fewer than two dozen pieces a year.
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Plain writing about British money, and the UK Wealth Blueprint to start with.