How Much Can a Director Take From a Limited Company Tax-Free? 2026/27
"Tax-free" means two different things for a company director. Personally, you can take a set amount with no Income Tax, National Insurance or dividend tax. The company is another matter: it still pays Corporation Tax on the profit behind any dividend, and employer National Insurance on salary above £5,000. This guide gives the personal figure for 2026/27 and shows which way of taking it costs the company least.
Written by James Whitfield · Last reviewed 7 November 2026 · Checked against 2026/27 HMRC rates · Editorial standards · Methodology
- With no other income you can take £13,070 with no personal tax: the £12,570 Personal Allowance plus the £500 dividend allowance.23
- A £12,570 salary and a £500 dividend needs the least company profit: £14,322.79, against £14,962.97 with a £5,000 salary.
- As a monthly salary, £12,570 is £1,047.50 a month, with no Income Tax or employee NI.1
- A job elsewhere uses your Personal Allowance first, leaving only the £500 dividend allowance tax-free from the company.
For 2026/27 a director with no other income can take £13,070 a year from their company without paying any personal tax. The usual way is a £12,570 salary, which is below both the Personal Allowance and the employee National Insurance threshold, plus a £500 dividend covered by the dividend allowance.
The company still pays tax. The £12,570 salary costs it £1,135.50 of employer NI (15% above £5,000) unless it can claim the Employment Allowance, and the £500 dividend comes out of profit that has paid £117.29 of Corporation Tax. Even so, this is the cheapest of the common routes: it needs £14,322.79 of profit, against £14,962.97 for a £5,000 salary with £8,070 of dividends.
- ·Personal tax-free total: £13,070
- ·Salary £12,570 = £1,047.50 a month
- ·Dividend allowance: £500
- ·Profit needed: £14,322.79
Where the £13,070 comes from
Two allowances add up to the figure. The Personal Allowance covers the first £12,570 of your income, whether it is salary or dividends.3 The dividend allowance then taxes the first £500 of dividends at 0%.2 Nothing else in the personal tax system adds to it for a typical director, so £13,070 is the ceiling whichever mix of salary and dividends you choose.
National Insurance does not reduce it. Employee NI starts at the primary threshold, £12,570 a year in 2026/27, so a salary of exactly £12,570 pays none.1 Directors' NI is worked out on an annual earnings period, so paying the salary in equal monthly amounts of £1,047.50 gives the same result as one payment.
Because the total is fixed, the real question is how to take it. Salary is a deductible cost for the company but attracts employer NI above £5,000. Dividends attract no NI but are paid out of profit after Corporation Tax. The table compares the three salaries directors usually choose.
| £12,570 salary + £500 dividendDividend £500; employer NI £1,135.50; Corporation Tax £117.29; company tax in total £1,252.79 | £14,322.79 |
| £6,708 salary + dividendsDividend £6,362; employer NI £256.20; Corporation Tax £1,492.32; company tax in total £1,748.52 | £14,818.53 |
| £5,000 salary + dividendsDividend £8,070; employer NI £0; Corporation Tax £1,892.96; company tax in total £1,892.96 | £14,962.97 |
The figure in the right-hand column is the profit the company must make before paying you. £12,570 salary needs the least, £14,322.79, and £5,000 salary the most, £14,962.97: a difference of £640.18 for the same £13,070 in your pocket.
The reason is the price of each pound. Above £5,000 a pound of salary costs the company £1.15 (the pound plus 15% employer NI), while a pound of dividend needs about £1.23 of profit at the 19% Corporation Tax rate. Salary is cheaper, so filling the Personal Allowance with salary wins. A £6,708 salary sits in between and is the lowest salary that counts towards your State Pension.1
If the company can claim the Employment Allowance
A company whose only employee paid above £5,000 is a director cannot claim the Employment Allowance.5 Once a second director or a member of staff is also paid above £5,000, it usually can, and the £10,500 allowance absorbs the employer NI on salaries.1
With the allowance the £12,570 salary costs the company nothing beyond the salary itself. The same £13,070 then needs £13,187.29 of profit, with £117.29 of Corporation Tax and no employer NI to pay. So with two directors on the payroll, a £12,570 salary each is the cheaper starting point.
- Two directors: salary and dividend split — the Employment Allowance with two directors
If the company makes less than £14,322.79
A small company cannot fund the full £13,070, and here the order of choices changes. With profit of £6,000, the most you can take with no personal tax at all is £5,869.57, all as salary of £5,869.57: the salary plus £130.44 of employer NI uses the whole profit, so there is no Corporation Tax. Left in the company, the same £6,000 would pay £1,140 of Corporation Tax.
At £10,000 of profit the answer is the same shape: a salary of £9,347.83 uses everything, costs £652.17 of employer NI and leaves you £9,347.83 with no personal tax. Paying a £5,000 salary and the rest as dividends would leave £9,050, because the dividends first lose £950 to Corporation Tax.
So a company making a small profit is not a reason to take only dividends. A salary that absorbs the profit avoids Corporation Tax entirely, as long as the salary is genuinely paid through payroll and stays below £12,570.
If you also have a job
Your Personal Allowance is used by your first income, which is usually the job. A director earning £30,000 elsewhere can take only the £500 dividend allowance from the company with no tax. On a company profit of £20,000, a £500 dividend costs nothing personally; taking £1,500 instead costs £107.50 of dividend tax, because the extra £1,000 lands in the basic-rate band at 10.75%.
A salary from the company is taxed through a second tax code from the first pound, at 20% for a basic-rate taxpayer. Up to £5,000 it still beats dividends, because it carries no employer NI, no employee NI (each job has its own threshold) and saves Corporation Tax. Paying out all of a £20,000 profit, a £5,000 salary plus dividends leaves £14,897.62, against £14,512.25 as dividends alone. Above £5,000 employer NI makes salary the dearer route, and leaving profit in the company for a year when your income is lower is the other option.
What the next £1,000 costs above £13,070
Above the tax-free amount, an extra £1,000 of dividend costs £107.50 of dividend tax while your total income stays under £50,270, and £357.50 once it is above.2 That is before the Corporation Tax the company has already paid on the profit behind it.
An extra £1,000 of salary above £12,570 costs you £280 in Income Tax and employee NI, and the company another £150 of employer NI, so further pay usually costs less as dividends. The basic-rate limit is the next real threshold: see how much a director can take before 40% tax.
Tax-free money that is not salary or dividends
Some value can reach you with no personal tax on top of the allowances. An employer pension contribution is not your income at all and is deductible for the company, within the £60,000 annual allowance.6 Certain benefits and expense payments are exempt too: trivial benefits up to £300 a year for a director of a close company, £6 a week for working from home, mileage at HMRC's approved rates and one company mobile phone.
A director's loan is not on the list. Money you borrow from the company is not income, but an overdrawn loan account can trigger a 35.75% s455 charge for the company and a benefit in kind for you if it goes over £10,000.
Frequently asked questions
What is the tax-free director salary for 2026/27?+
£12,570 a year, or £1,047.50 a month. It matches the Personal Allowance and the employee NI primary threshold, so there is no Income Tax or employee NI on it if you have no other income. The company pays 15% employer NI on the part above £5,000 unless it can claim the Employment Allowance.
How much dividend can I pay myself tax-free?+
£500 on top of a £12,570 salary. With a lower salary, dividends can also use the rest of your Personal Allowance: on a £5,000 salary, £8,070 of dividends is tax-free. Either way the personal total is £13,070.
My company made £6,000 profit. Is there no tax?+
Not automatically. Left in the company, £6,000 of profit pays £1,140 of Corporation Tax. Paid out as a salary of £5,869.57, which with employer NI uses the whole profit, there is no Corporation Tax and no personal tax.
Does the dividend allowance mean £500 of profit is tax-free?+
No. The allowance only covers dividend tax. The company has already paid Corporation Tax on the profit it distributes, so a £500 dividend needs about £617 of profit at the 19% rate.
Is it different in Scotland?+
The £13,070 total is the same: the Personal Allowance is £12,570 in Scotland too, and dividends use UK rates and the same £500 allowance.
Where these figures come from
The rates and rules on this page are drawn from the official UK government sources below, using the confirmed 2026/27 figures. Each link opens the relevant HMRC, GOV.UK or Companies House page in a new tab.
- Rates and thresholds for employers 2026 to 2027 www.gov.uk/guidance/rates-and-thresholds-for-employers-2026-to-2027
- Tax on dividends www.gov.uk/tax-on-dividends
- Income Tax rates and Personal Allowances www.gov.uk/income-tax-rates
- Corporation Tax rates and reliefs www.gov.uk/corporation-tax-rates
- Employment Allowance: check if you're eligible www.gov.uk/claim-employment-allowance/eligibility
- Tax on your private pension contributions: annual allowance www.gov.uk/tax-on-your-private-pension/annual-allowance
- Running a limited company: taking money out www.gov.uk/running-a-limited-company/taking-money-out-of-a-limited-company
Estimate your limited company tax
The limited company tax calculator turns this guidance into a concrete estimate for corporation tax, dividends and personal take-home, based on 2026/27 HMRC rates.