You have a few thousand pounds sitting in your property company's bank account and you want it in your own account. Every landlord who holds buy-to-let through a limited company eventually asks the same thing: what is the cheapest way to get it out? Salary, dividend, or leave it where it is?
The honest answer depends on your corporation tax rate and your personal tax band, but the pattern is consistent enough to plan around. Here is how the three routes actually compare for the 2026-27 tax year.
The money is taxed twice, unless it is salary
Money taken as a dividend has already been through corporation tax inside the company, then gets taxed again in your hands as dividend income. Two layers.
Money taken as salary is deducted from the company's profit before corporation tax, so it skips that first layer. The catch is National Insurance: the company (employer NI) and you (employee NI) both pay it on salary, whereas dividends carry no NI at all.
Money you retain pays corporation tax once and then sits there, with no personal tax until you draw it out later.
That trade-off, one tax layer plus NI versus two tax layers without, is the whole game.
The rates you are working with (2026-27)
- Corporation tax: 19% on profits under £50,000, 25% over £250,000, and an effective 26.5% on the slice in between (gov.uk).
- Dividend tax: after a £500 tax-free allowance, 8.75% (basic), 33.75% (higher) and 39.35% (additional rate) (gov.uk).
- Employer NI: 15% on pay above £5,000 a year since 6 April 2025, up from 13.8% above £9,100 (announced at the Autumn Budget 2024, gov.uk).
- Employee NI: 8% between £12,570 and £50,270, then 2% above.
A single-director company with no other staff cannot claim the £10,500 Employment Allowance (gov.uk), so it wears the full employer NI bill. Rates change at fiscal events, so check current figures before you act.
Worked example: £100 of company profit, three ways
Take a company paying the 19% small-profits rate and follow one £100 of pre-tax profit to the director's pocket. This ignores allowances, so these are marginal rates (the tax on the next pound you extract).
| Route (per £100 of company pre-tax profit) | Basic-rate director | Higher-rate director |
|---|---|---|
| Take it as salary | £62.61 net (37.4% lost) | £50.44 net (49.6% lost) |
| Take it as dividend | £73.91 net (26.1% lost) | £53.66 net (46.3% lost) |
| Retain in the company | £81 stays put (19% now, personal tax deferred) | £81 stays put (19% now, deferred) |
The salary figures already carry 15% employer NI on top, plus income tax and employee NI. That is why, at the 19% corporation tax rate, dividends beat salary in both bands: the NI on salary costs more than the corporation tax you save by deducting it.
One important twist. Once your company pays the 25% main rate, or sits in the 26.5% marginal band, the salary deduction is worth far more and the two routes draw roughly level. For a higher-rate director at 25% corporation tax, salary (about 49.6% lost) can even nose ahead of a dividend (about 50.3%). So the "dividends always win" rule of thumb only holds while you are on the small-profits rate.
The small-salary-plus-dividend combo still works
The standard owner-manager plan is a modest salary topped up with dividends, and it survives the April 2025 NI changes, just with a smaller margin.
Pay yourself a £12,570 salary (assuming you have no other income). It uses your personal allowance, so no income tax, and it sits right at the NI primary threshold, so no employee NI. As a sole director you do pay employer NI on the slice above £5,000: (£12,570 − £5,000) × 15% = £1,135.50.
But the salary and that NI are both deductible, saving corporation tax of (£12,570 + £1,135.50) × 19% = £2,604. The saving comfortably beats the NI cost, and you have taken £12,570 out of the company with almost no tax friction. Then draw the rest as dividends, which face no NI. This combo is usually the lowest-tax way to reach a given income.
Retaining is deferral, not a discount
Leaving profit in the company looks cheap because you only pay 19% now. But that money is not tax-free, it is tax-deferred. When you eventually take it out, dividend or salary tax still applies.
Retaining makes sense when you do not need the cash and want it working: a retained £81 out of every £100 can fund deposits on the next property, compounding inside the company rather than being clipped by personal tax first. It also helps if you can time extraction for a low-income year, such as a career break or retirement, when you might drop from higher-rate to basic-rate dividend tax. Note that Business Asset Disposal Relief and the lower capital gains route on winding up are generally not available to a pure property-investment company, so do not bank on extracting the pot cheaply at the end.
Two routes people forget
Employer pension contributions. The company can pay into your pension directly. The contribution is deductible for corporation tax, carries no income tax and no NI, which often makes it the single most efficient way to extract value, if you are happy to lock it away until age 57. The annual allowance is £60,000 for 2026-27, tapered for very high earners.
Repaying a director's loan. If you lent your own money to the company, say for a deposit, repaying that loan to yourself is a return of capital, not income, so it carries no tax at all. This only works up to the balance you actually put in.
The property-company catch on salary
There is a wrinkle specific to buy-to-let companies. A salary must be paid "wholly and exclusively" for the business, and a company that simply holds rental property does relatively little active work. HMRC can challenge a large director's salary as excessive for the duties performed. A modest, defensible salary for genuine administration is fine; a five-figure salary justified only by tax planning is riskier. When in doubt, keep the salary small and lean on dividends.
Before you decide
The tax you lose on extraction is part of the real cost of running property through a company, so weigh it against the whole picture rather than in isolation. Our limited company vs personal calculator models both wrappers side by side so you can see whether the corporation-plus-dividend total actually beats owning in your own name for your figures.
This is general information, not tax or financial advice. Rates and thresholds change, and your own mix of income, other properties and long-term plans all shift the answer, so check the current gov.uk figures and speak to an accountant before you draw anything.
