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Owner-managed companies / extraction planning

Director extraction planner

This is the practical owner-manager question: once salary, employer NIC, corporation tax, dividends, and employer pension contributions all hit the same picture, what is the cleanest way to get value out of the company?

Scope: this is a first-pass 2026/27 planner for a single close company using the annual payroll method, standard corporation-tax marginal-relief bands, and no Employment Allowance. It does not model associated companies, student loan, Scottish income tax, director loan accounts, or benefit-in-kind planning.
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Your inputs

Estimated total value extracted
£0 Waiting for a company extraction read.
Salary kept after tax and NIC£0
Employer pension value£0
Employer NIC£0
Corporation tax£0
Extraction efficiency0%

What this means

This tool starts on the company side first, because dividends do not appear by magic. Salary, employer NIC, and pension contributions all change the corporation-tax base before you even get to the personal tax side.

Professional read

Key assumption

The company is treated as a standalone close company with no associated-company adjustment and no Employment Allowance, so the salary plus dividend picture stays conservative.

Common mistake

Comparing salary and dividends only on the personal side while ignoring employer NIC and corporation tax, which is where a lot of the extraction picture actually changes.

Best next action

If the employer pension contribution looks attractive here, check it against your annual allowance (usually £60,000, less if tapered) with the pension carry forward calculator before assuming all of that pension funding is charge-free.

When it breaks down

Multiple companies, Scottish income tax, student loan, director loan planning, or benefit-in-kind routes need a fuller extraction model than this first pass.

Company and personal tax stack

LineAmount

Source basis: HMRC 2026/27 PAYE thresholds, GOV.UK corporation-tax rates and marginal-relief bands, and the standard 2026/27 dividend allowance and dividend tax rates for rest-of-UK taxpayers.

Dividend vs salary calculator

How this planner works

The planner works company side first, then personal side, using the 2026/27 rates for a director living in England, Wales or Northern Ireland:

  1. Employer National Insurance = 15% of salary above the £5,000 Secondary Threshold. No Employment Allowance is deducted, because a company whose only director is the only employee paid above that threshold cannot claim it.
  2. Taxable profit = profit before extraction − salary − employer National Insurance − employer pension contribution.
  3. Corporation Tax = 19% up to £50,000 of profit, 25% from £250,000, and in between 25% less marginal relief of (£250,000 − profit) × 3/200. It assumes a 12-month accounting period and no associated companies.
  4. Dividends are paid only out of what is left after Corporation Tax; a larger request is cut back to that amount. Profit not paid out stays in the company and is not counted as extracted.
  5. Salary uses the Personal Allowance first, then the 20%, 40% and 45% bands, with employee National Insurance at 8% from £12,570 to £50,270 and 2% above.
  6. Dividend tax: dividends sit on top of salary and other income. The first £500 is covered by the dividend allowance (it still uses up band), then 10.75% in the basic-rate band, 35.75% in the higher-rate band and 39.35% above £125,140.
  7. Value extracted = salary after tax and NI + dividends after tax + the employer pension contribution, which the planner counts at face value.

Worked example: the default figures

A one-director company makes £120,000 before paying its director. It pays a £12,570 salary, a £20,000 employer pension contribution and £45,000 of dividends. The director has no other income.

StepAmount
Employer NI: (£12,570 − £5,000) × 15%£1,136
Taxable profit: £120,000 − £12,570 − £1,136 − £20,000£86,295
Corporation Tax: 25% (£21,574) less marginal relief (£250,000 − £86,295) × 3/200 (£2,456)£19,118
Left for dividends£67,176
Salary tax and employee NI (all within the £12,570 allowance and threshold)£0
Dividend tax: £500 at 0%, £37,200 at 10.75% (£3,999), £7,300 at 35.75% (£2,610)£6,609
Spendable cash: £12,570 + (£45,000 − £6,609)£50,961
Value extracted including the £20,000 pension£70,961
Extraction efficiency: £70,961 ÷ £120,00059.1%

The salary uses the director’s whole Personal Allowance, so the dividends start in the basic-rate band: £37,700 of band minus the £500 allowance leaves £37,200 at 10.75%, and the last £7,300 falls in the higher-rate band. About £22,176 of post-tax profit stays in the company. The efficiency figure ignores that retained profit, which is taxed again when it is paid out later, so compare mixes on the same profit.

Sources, checked 3 October 2026: HMRC rates and thresholds for employers 2026 to 2027; GOV.UK, Employment Allowance eligibility; GOV.UK, Corporation Tax rates and marginal relief; HMRC manual CTM03910 (the 3/200 fraction); GOV.UK, tax on dividends; GOV.UK, Income Tax rates; GOV.UK, pension annual allowance.

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