Optimise UK Ltd Company extraction.
Net take-home
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Corp Tax
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PAYE + NI
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Dividend tax
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Your breakdown
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The extraction puzzle every owner-director faces
Once your company has made a profit, the money is the company's, not yours. Getting it into your own bank account efficiently is the central tax decision of running a limited company, and it comes down to the mix of salary and dividends. Salary is a deductible expense that cuts the corporation tax bill but attracts income tax and two layers of National Insurance. Dividends carry no NI and lighter tax rates, but they are paid from profit that has already suffered corporation tax. This tool runs the whole chain for a given profit and salary so you can see the net that lands in your pocket.
The conventional answer for a single-director company is a salary pitched at the personal allowance and the rest taken as dividends. A £12,570 salary is fully covered by the personal allowance so it pays no income tax, sits at or just above the National Insurance primary threshold so it costs the director nothing in employee NI, and still counts as a qualifying year towards the State Pension. Crucially it is a deductible expense, so it shaves corporation tax off the top.
Tracing £80,000 of profit to take-home
Take a company with £80,000 of profit before any extraction and a director on the standard £12,570 salary. Watch how the layers come off. The salary is deducted, leaving £67,430 of taxable profit. Corporation tax bites in the marginal zone between the £50,000 small-profits limit and the £250,000 main-rate threshold, producing £14,119. That leaves £53,311 to declare as a dividend, which is then taxed on the director as it stacks on top of the salary.
The waterfall makes the leakage visible. From £80,000 of profit, roughly £22,500 goes to HMRC across corporation tax and dividend tax, and about £57,500 reaches the director.
When more salary actually wins
The personal-allowance salary is a strong default, but it is not universal. Two situations flip the maths. First, if your company qualifies for the Employment Allowance, the first chunk of employer NI is wiped out, which can make a salary up to the £50,270 mark worth modelling because the NI cost largely disappears while the corporation tax saving remains. Second, pension contributions made by the company are deductible and escape the dividend route entirely, so for higher profits an employer pension contribution often beats taking the cash as a dividend at all. This calculator focuses on the salary and dividend split; treat a company pension contribution as a separate, usually superior, lever for profit you do not need today.
Does this work for a two-director couple?
Often very well. If both spouses are genuine directors or shareholders, each has their own personal allowance, basic-rate band, and £500 dividend allowance. Splitting income across two people keeps more of it in the cheap 8.75 percent band and can avoid the higher-rate dividend charge entirely. The shares must reflect genuine ownership, and HMRC will look through arrangements that are purely cosmetic.
Why not just take it all as salary?
Because salary above the personal allowance is the most heavily taxed route. It pays income tax at 20 or 40 percent, employee NI, and employer NI at 13.8 percent on top, and although it reduces corporation tax, the combined burden usually exceeds the corporation-tax-plus-dividend-tax cost of the same money taken as a dividend. The exception is salary up to the personal allowance, which is why almost every owner-director takes at least that much.