How Much DoAgency OwnersMake in the UK?

Total compensation ranges from £30,000-£50,000 at agencies under £250k revenue, to £80,000-£150,000+ at £1m-£5m revenue. These figures include both PAYE salary and dividends. Reported salary figures on job boards (£40,000-£70,000) only show PAYE income and significantly understate what agency owners actually take home. The key variable is net profit margin: a 10% margin agency at £500k revenue has very different owner pay potential than a 25% margin agency at £300k.

£12,570 per year if your company has employees and qualifies for the £10,500 Employment Allowance. This equals the personal allowance (zero income tax) and the employee NI threshold (zero employee NI). If you are a sole director with no employees, £6,708 (the Lower Earnings Limit for 2026/27) avoids all NI while building State Pension credits. Taking less than £6,708 means missing out on a qualifying year for your State Pension.

A mix of both is optimal. Take a salary of £12,570 to use your personal allowance tax-free, then dividends for day-to-day income. On £100,000 total extraction, this strategy saves approximately £11,400 per year compared to taking everything as salary. Dividends avoid National Insurance entirely but are paid from post-Corporation Tax profits. The 2026/27 dividend tax rates are 10.75% (basic) and 35.75% (higher). Read our full guide to paying yourself from a limited company for step-by-step calculations.

Industry guidance suggests 10-50% of net profits, with the percentage decreasing as revenue grows. At under £250k revenue, take what the business can afford while maintaining 3 months of operating costs in reserve. At £500k+, aim for at least what an employed head of marketing would earn (£60,000-£80,000). Never set your extraction level without a 90-day cash flow forecast. The right number is the maximum your business can sustain over 12 months, not just this month.

Basic rate rises from 8.75% to 10.75%. Higher rate rises from 33.75% to 35.75%. Additional rate stays at 39.35%. The £500 dividend allowance is unchanged. On £50,000 of dividends at higher rate, you pay approximately £990 more per year. If you have retained profits, consider bringing forward dividends before 6 April 2026 to save 2% on every pound above £500. See our dividend tax 2026 guide for the full analysis.

Yes, they are the single most tax-efficient extraction method. Employer pension contributions are deductible against Corporation Tax (saving 19-25%), free of employer NI (saving 15%), and free of personal income tax and NI. The annual allowance is £60,000 for 2026/27. The trade-off is that the money is locked until you reach minimum pension age (currently 55, rising to 57 from 2028). For most agency owners earning £80,000+, putting £20,000-£40,000 into pension alongside dividends for day-to-day income is the optimal mix.

London agency owners typically earn 30-60% more in total compensation due to higher billing rates and larger client budgets. Average reported salary is up to £166,000 in London compared to £40,000-£70,000 nationally. However, office rent, staff salaries, and cost of living are significantly higher, which can compress net profit margins. The salary/dividend structuring principles apply equally regardless of location. Focus on your net profit percentage, not your top-line revenue.

The industry target is 50% gross profit margin and 20% operating (EBIT) margin. According to BenchPress 2024 data, average gross profit margin for £1m+ agencies was 39%, with only 24% hitting the 50% target. Revenue per head target is £100,000 gross profit per full-time employee. If your margins are below these benchmarks, increasing owner pay may not be the priority. Focus on pricing, utilisation rates, and overhead management first. Our profitability calculator can help you benchmark your agency.

Four main costs: (1) Reduced mortgage borrowing, as lenders assess salary not dividends for affordability. (2) Lower statutory maternity and paternity pay, which is calculated on salary. (3) Reduced state pension entitlement if salary is below the Lower Earnings Limit (£6,708 for 2026/27). (4) A weaker position in any HMRC IR35 review, where artificially low salary alongside high dividends can attract scrutiny. For most agency owners, £12,570 strikes the right balance between tax efficiency and practical benefits.

Base it on four signals, not gut feel: (1) Your 90-day cash flow forecast is consistently positive. (2) Retained profit covers 3+ months of operating costs. (3) Monthly recurring revenue has been stable or growing for 6+ months. (4) Team utilisation is above 70%. Key thresholds: at £250k revenue, start regular dividends. At £500k, match an employed head of marketing (£60,000-£80,000). At £1m+, match or exceed an employed marketing director (£80,000-£120,000+).

Partially. The first £12,570 of salary is income-tax-free (personal allowance). The first £500 of dividends is tax-free (dividend allowance). Employer pension contributions are not taxed personally at all. Reimbursed business expenses (mileage at 45p/mile, working from home allowance at £6/week, equipment, software) are also tax-free. Beyond these, all extraction triggers some tax. The goal is not zero tax but the lowest combined rate across Corporation Tax, income tax, NI, and dividend tax.

At similar revenue levels, there is no significant difference in total owner compensation between digital and creative agencies. The variation comes from profit margins, not agency type. PPC and performance agencies sometimes achieve higher margins (25-30%) because media spend passthrough inflates revenue without proportional cost. Creative and design agencies tend to have tighter margins (15-20%) because delivery is more labour-intensive. Higher-margin agencies can afford to pay their owners more at the same revenue level.