Knowing how to pay yourself as a dental practice owner is one of the recurring financial decisions of running an incorporated practice. Most owners operate through a limited company, which gives two main routes out of the business: a salary through PAYE and dividends from post-tax profit. The right dental practice owner salary is rarely the full amount; it is usually a modest salary topped up with dividends, and the exact split depends on your profit level, your other income and whether you are still building NHS pension.
This page covers the mechanics: how each route is taxed at current rates, where to set the salary for a single-director company, and a worked extraction example at 2026/27 figures. For the deeper optimisation question (the precise split that minimises total tax at a given profit) see our companion guide on the optimal salary and dividend split for 2026/27.
Salary vs dividends: the basics
A salary is a deductible business expense for the company, so it reduces the profit subject to corporation tax. Against that, salary attracts National Insurance on both sides (employee and employer) and income tax through PAYE. It is predictable and it builds pension and state-benefit entitlement, but it is the more expensive pound for pound at most profit levels.
Dividends are paid from profit that has already borne corporation tax. There is no National Insurance on a dividend, which is the structural reason the salary vs dividends dentist comparison usually favours dividends for the bulk of extraction. The trade-off is that dividends are not deductible for the company and are not pensionable for an NHS dentist (more on that below).
Current tax rates (2026/27)
- Corporation tax: 19% on profits up to £50,000, 25% on profits over £250,000, with marginal relief tapering the rate between those two limits (the £50,000 to £250,000 slice carries an effective marginal rate of about 26.5%).
- Dividend tax (2026/27): 10.75% ordinary rate, 35.75% upper rate, 39.35% additional rate, after a £500 dividend allowance. These rose from the 2025/26 figures of 8.75% and 33.75% on 6 April 2026 (Finance Act 2026); the additional rate and the £500 allowance were unchanged.
- National Insurance: employee Class 1 main rate 8% above the primary threshold (around £12,570), then 2% above the upper earnings limit. Employer (secondary) Class 1 NIC is 15% on pay above the £5,000 secondary threshold (the threshold was cut to £5,000 and the rate raised to 15% from 6 April 2025).
Two points are easy to get wrong and worth flagging. First, the old 12% employee and 13.8% employer figures are out of date: the employee main rate dropped to 8% from 6 April 2024 and the employer rate rose to 15% from 6 April 2025. Second, the employer NIC threshold is no longer £12,570; it is the £5,000 secondary threshold, which is what drives the salary decision below.
The dental practice owner salary decision
For a single-director company there is no Employment Allowance to lean on (it is not available where the only employee is a sole director), so employer NIC bites from the first pound above £5,000. That leaves two sensible settling points.
- Salary around the £5,000 to £6,708 band: the £5,000 secondary threshold is the point above which the company starts paying employer NIC, so a salary at exactly £5,000 carries no employer NIC. But a year only counts towards the state pension once pay reaches the £6,708 Lower Earnings Limit. Setting salary in the narrow band between the two (at or just above £6,708) keeps the qualifying year while the employer NIC due, charged at 15% on the slice above £5,000, stays very small.
- Salary at £12,570: uses the full personal allowance, so the salary itself carries no income tax and no employee NIC (the primary threshold is also around £12,570). The cost is employer NIC at 15% on the slice between £5,000 and £12,570, roughly £1,136, which the company pays. Because that £1,136 is itself deductible for corporation tax, the net cost is smaller than it looks.
The honest position is that neither figure is universally "correct". A salary at £12,570 saves more corporation tax (a bigger deductible expense) but costs employer NIC; a salary at the secondary threshold avoids employer NIC but leaves more profit in the company to bear corporation tax before it can be drawn as a dividend. The gap between the two is modest, and the deciding factors are often non-tax: protecting the state-pension year, pension contribution room, and whether a spouse is genuinely employed. If your spouse does real work in the practice at a market rate, employing them unlocks the £10,500 Employment Allowance and can flip the maths. We work the exact figures in the split deep-dive.
| Single-director salary choice (2026/27) | Salary at £5,000 | Salary at £12,570 |
|---|---|---|
| Employer NIC (15% above £5,000) | £0 | about £1,136 |
| Employee NIC and income tax on salary | £0 | £0 |
| State-pension year secured | Only if topped above the £6,708 LEL | Yes |
| Corporation tax saved by the salary deduction | Smaller | Larger |
| Employment Allowance available | No (single director) | No (single director) |
Dividend extraction strategy
Once the salary is set, dividends do the heavy lifting. The first £500 of dividends is covered by the dividend allowance and taxed at 0%. Above that, with the personal allowance already absorbed by the salary, dividends falling in the basic-rate band are taxed at 10.75% in 2026/27, dividends in the higher-rate band at 35.75%, and any above the additional-rate threshold at 39.35%. Remember the dividend rates stepped up by two points on 6 April 2026, so figures quoted for 2025/26 (8.75% and 33.75%) understate the current cost.
Dividends must come from distributable reserves and need a board minute and a voucher. If you draw cash ahead of declared profit, the director's loan account goes overdrawn and a separate set of charges applies, including a section 455 charge at the dividend upper rate. We cover that in overdrawn director's loan accounts for dental companies.
Worked example: a sole-director practice with £100,000 profit
Take a single-director dental company with £100,000 of profit before the director's salary, paying a salary of £12,570 in 2026/27. The numbers below are anonymised and illustrative; your own figures will differ.
- Salary: £12,570 (no income tax, no employee NIC).
- Employer NIC: (£12,570 − £5,000) × 15% = £1,136, paid by the company.
- Profit after salary and employer NIC: £100,000 − £12,570 − £1,136 = £86,294. This is the profit chargeable to corporation tax.
- Corporation tax (marginal relief applies): £86,294 × 25% = £21,574, less marginal relief of (£250,000 − £86,294) × 3/200 = £2,456, giving £19,118.
- Distributable profit (dividends available): £86,294 − £19,118 = £67,176.
- Dividend tax: £500 at 0%; the next £37,200 (filling the basic-rate band) at 10.75% = £3,999; the remaining £29,476 at the upper rate 35.75% = £10,538. Total dividend tax £14,537.
- Total take-home: £12,570 salary + (£67,176 − £14,537) dividends = £65,209.
The single most common error in older guides is treating the corporation tax as a flat 19%. At £100,000 of profit the company is well above the £50,000 small-profits limit, so the 25% main rate applies with marginal relief, not 19%. On the headline £100,000 figure the corporation tax is £22,750 (25% of £100,000 is £25,000, less marginal relief of (£250,000 − £100,000) × 3/200 = £2,250), an effective rate of 22.75%. After deducting the salary and employer NIC, the chargeable profit falls to £86,294 and the tax to £19,118 as above. Either way the rate is not 19%.
For a fuller side-by-side of taking profit as salary versus dividends, and how pension contributions fit in, see dental practice profit extraction.
Pension contributions and owner pay
An employer pension contribution is one of the most efficient extraction routes a dental company has. It is deductible for corporation tax on a paid basis, it carries no National Insurance on either side, and it does not count as income in your hands when paid in. The contribution is subject to the annual allowance (£60,000 for 2025/26, tapered for high earners, with up to three years of unused allowance available to carry forward). For an owner who is comfortable leaving money invested for retirement, routing some profit through an employer pension contribution can be more efficient than taking the equivalent as a dividend.
Note the interaction with NHS pension below: an employer contribution to a private pension is a separate matter from NHS scheme accrual and does not replace it.
The NHS pension trap on dividends
This is the point most salary-versus-dividend guides skip, and for an NHS dentist it can outweigh the tax. Dividends are not pensionable. An incorporated principal who is treated as an officer in the NHS Pension Scheme accrues benefits only on the PAYE salary, not on dividends. So an owner who takes a small salary plus a large dividend, while tax-efficient on paper, can be quietly giving up scheme accrual worth tens of thousands of pounds over a ten to fifteen year run to retirement, because the 2015 CARE scheme builds 1/54th of pensionable pay each year and dividends never enter that figure.
This does not mean dividends are wrong; it means any extraction comparison for an NHS dentist has to be run with the lost accrual on the table, not just the tax saving. The position for a contract-holding principal is more nuanced than for an incorporated associate and should be confirmed with NHSBSA. We set out the mechanics in the NHS pension incorporation trap, and whether incorporating still pays once the dividend rise and the pension loss are both counted in is dental incorporation still worth it after the 2026/27 dividend rise.
Timing your profit extraction
Unlike an associate on a monthly fee split, an owner controls when profit comes out. That flexibility is a planning tool. If a single year's dividend would push you across the higher-rate threshold, splitting the payment across two tax years (some before 5 April, the balance after) can keep more of it in the basic-rate band at 10.75% rather than 35.75%. The same logic applies around the £100,000 mark where the personal allowance starts to taper, and around the £125,140 additional-rate threshold.
Common mistakes to avoid
Do not run the company account as a personal account. Every pound out should be identifiable as salary, dividend, expense reimbursement or a documented director's loan. Informal drawings create an overdrawn loan account and the section 455 charge that goes with it.
Do not declare dividends without checking distributable reserves first, and do not declare them without the board minute and voucher. An unlawful distribution can be recharacterised, undoing the tax efficiency you were aiming for.
Do not assume a structure that suited a sole trader still suits you once profits grow, or that incorporation is automatically the answer. The choice between trading as a sole trader and as a limited company turns on more than the headline rates; see sole trader vs limited company for dentists.
When to take advice
The right answer depends on your profit level, your other income, your family's involvement in the practice, your pension position and your plans for selling. A single-site owner drawing £80,000 faces a different calculation from a multi-site owner extracting several hundred thousand. Review the strategy each year, because rates, allowances and your own circumstances move, and run the salary, dividend, pension and NHS-accrual figures together rather than in isolation.