Dividend vs Salary Calculator
Compare how much a limited company director keeps from a salary, dividends or a mix of both.
For 2026/27 most directors take a salary of £12,570, which uses the personal allowance and sits exactly at the employee National Insurance threshold, and draw the rest as dividends. Dividends above the £500 allowance are taxed at 10.75% in the basic rate band, 35.75% in the higher band and 39.35% above that, after corporation tax of 19% or 25%.
Highest take-home
£0.00
A: salary £5,000 + dividends. Total tax £0.00, 0.0% of profit. An estimate for 2026/27.
Three presets and your own split
| Scenario | Salary | Dividends | Employer NI | Corporation tax | Employee NI | Income tax | Dividend tax | Total tax | Take-home |
|---|---|---|---|---|---|---|---|---|---|
| A: salary £5,000 + dividends | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 |
| B: salary £12,570 + dividends | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 |
| C: all salary | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 |
| Custom split | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 | £0.00 |
A is salary at the employer secondary threshold (£5,000), B at the employee primary threshold (£12,570), C pays everything the company can afford as salary. This comparison ignores pension contributions and student loans.
Custom split
Up to £0.00 after employer NI.
Custom split take-home £0.00 after £0.00 of tax.
Rates used for 2026/27
| Item | Rate or amount |
|---|---|
| Dividend allowance (taxed at 0%) | £500 |
| Basic rate band | 10.75% |
| Higher rate band | 35.75% |
| Additional rate band | 39.35% |
| Item | Rate or amount |
|---|---|
| Small profits rate (up to £50,000) | 19% |
| Main rate (from £250,000) | 25% |
| Marginal relief fraction between the limits | 3/200 |
| Item | Threshold or rate |
|---|---|
| Employer secondary threshold | £5,000 |
| Employer rate above the secondary threshold | 15% |
| Employment Allowance (where eligible) | £10,500 |
| Employee primary threshold | £12,570 |
| Employee upper earnings limit | £50,270 |
| Employee main rate | 8% |
| Employee rate above the upper earnings limit | 2% |
Source: GOV.UK: Tax on dividends; HMRC: Rates and thresholds for employers 2026 to 2027; HMRC: Income Tax rates and allowances. Last updated .
How to use the dividend vs salary
Why is £12,570 the usual director’s salary?
A salary of £12,570 is covered by the personal allowance, so no income tax, and equals the primary threshold, so no employee National Insurance. The company pays employer National Insurance at 15% on the part above £5,000, which is £1,135.50, but both the salary and that NI are deducted before corporation tax. Because the salary is above the £6,708 lower earnings limit it also counts as a qualifying year for the state pension. A company with only one director on the payroll cannot claim the £10,500 Employment Allowance.
How are dividends taxed?
Dividends come out of profit that has already paid corporation tax. The first £500 each year is tax free; the rest is taxed at the dividend rate for whichever income tax band it falls into, sitting on top of your salary.
| Band | Total income | Dividend rate |
|---|---|---|
| Dividend allowance | First £500 of dividends | 0% |
| Basic rate | Up to £50,270 | 10.75% |
| Higher rate | Up to £125,140 | 35.75% |
| Additional rate | Over £125,140 | 39.35% |
How does corporation tax change the comparison?
Salary is paid before corporation tax; dividends are paid after it. The company pays 19% on profit up to £50,000, 25% above £250,000, and a marginal rate between the two, so the real cost of a dividend is the corporation tax plus the dividend tax together. Enter your profit before salary and the calculator works through salary, employer National Insurance, corporation tax and dividend tax in that order, then shows what lands in your personal account under each split.
What does a £50,000 profit look like?
- Salary £12,570, employer NI £1,135.50, leaving £36,294.50 taxable profit
- Corporation tax at 19%: £6,895.96
- Dividends available: £29,398.54
- Dividend tax: (£29,398.54 − £500) × 10.75% = £3,106.59
- Total tax £11,138.05; you keep £38,861.95
Compare that with the same profit as a sole trader in the self assessment calculator, or read when a limited company saves tax. The calculator ignores pension contributions, student loans and benefits in kind, all of which can change the answer.
Frequently asked questions
- What is the most tax-efficient director’s salary for 2026/27?
- £12,570 for most sole directors. It uses the whole personal allowance, attracts no employee National Insurance and keeps the state pension record going. The company pays £1,135.50 employer National Insurance on it, which is deductible against corporation tax.
- How much tax do I pay on £30,000 of dividends?
- With a £12,570 salary and nothing else, £30,000 of dividends fall entirely in the basic rate band. Take off the £500 allowance and tax the rest at 10.75%: £3,171.25. The company has already paid corporation tax on the profit those dividends came from.
- Can I pay dividends if the company made a loss?
- No. Dividends can only be paid out of retained profit after corporation tax, shown in the accounts. Paying one without profit makes it an illegal dividend that you may have to repay, so check the figures before each payment and minute the decision.
- Do I pay National Insurance on dividends?
- No, neither you nor the company pays National Insurance on dividends. That is the main reason dividends are usually cheaper than salary above £12,570. The trade-off is that dividends do not count as earnings for pension contribution limits or mortgage affordability in the same way.
- Does the calculator cover Scotland?
- Partly. Dividend tax rates and bands are set for the whole UK, so the dividend side is identical. Salary above the personal allowance is taxed at Scottish rates for Scottish taxpayers, and the calculator applies those when you choose Scotland.
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Read next
- When should a sole trader become a limited company?The profit level where a limited company starts to save tax, the extra admin it brings and the non-tax reasons people incorporate.
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Cite this page: “Dividend vs Salary Calculator”, SoleKit, https://solekit.co.uk/dividend-vs-salary-calculator