No. Dividends are paid out of profit after corporation tax has been charged, so they do not reduce the company’s corporation tax bill. They are a distribution of retained profit to shareholders, not a business expense, and they do not appear as a deduction in the company’s tax computation.
This is the difference that catches directors of small companies out. A salary paid to a director is a cost of the business and reduces taxable profit, and it brings employer and employee National Insurance and PAYE with it. A dividend does not reduce taxable profit at all, but it is taxed on the individual at dividend rates rather than as employment income, and it carries no National Insurance.
That is why the salary-versus-dividend question is a real one for owner-managed companies, and why the answer changes when rates change. It depends on the company’s profit, the director’s other income, and the dividend allowance, dividend tax rates, corporation tax rates and National Insurance thresholds in force for the year — all of which are set at Budgets and are published on gov.uk.
There are also legal limits. A dividend can only be paid out of distributable profits. Paying one when the company does not have them can make it unlawful and leave it to be reclassified — often as a director’s loan, with its own tax consequences.
Do not set your own mix from a rule of thumb. Your accountant should model it against your actual figures each year.
This is general information, not tax advice. Confirm your own position with your accountant or HMRC.