Salary vs Dividend Calculator
Compare what you actually keep from different combinations of salary and dividends as a company director.
Using 2026/27 UK tax rates
Profit for the year before your salary, employer NI and Corporation Tax.
Try different levels to compare. All remaining profit after tax is treated as dividends.
Advanced options
Rental profit, a second job, pension income and similar. Excludes dividends.
Scottish rates apply to salary. Dividends are taxed at UK-wide rates.
Not available where the only employee paid above the Secondary Threshold is a single director.
Shares the Corporation Tax thresholds between companies under common control.
Your estimated take-home
£46,091.20
- Salary
- £12,570.00
- Employer NI (company)
- £1,135.50
- Corporation Tax
- £8,795.96
- Dividends paid
- £37,498.54
- Income Tax on salary
- £0.00
- Employee NI
- £0.00
- Dividend tax
- £3,977.34
- Total tax and NI
- £13,908.80
- Overall effective rate
- 23.18%
Comparison at other salary levels
| Salary | Dividends | Total tax & NI | Take-home |
|---|---|---|---|
| £5,000.00 | £44,175.00 | £14,706.29 | £45,293.71 |
| £12,570.00 | £37,498.54 | £13,908.80 | £46,091.20 |
| £50,270.00 | £2,380.99 | £18,577.46 | £41,422.54 |
Based on the same company profit and options. Tax is only one factor in choosing how to pay yourself.
What this means
Taking a salary of £12,570.00 and dividends of £37,498.54 from £60,000.00 of profit leaves you with £46,091.20 personally. Total tax and National Insurance across the company and you personally is £13,908.80.
There is no single "optimum" salary that suits everyone. Pension contributions, state pension credits, mortgage applications, other income and whether your company can afford to pay dividends all matter as much as the tax figures.
Quick answers
- Is salary or dividends more tax efficient?
- Usually a low salary plus dividends beats an all-salary approach, because dividends avoid National Insurance. There is no single answer that suits everyone — it depends on your profit, other income and whether Employment Allowance is available, so use the calculator with your own figures.
- Why does taking dividends instead of salary save National Insurance?
- Dividends are never subject to employee or employer National Insurance, which is the main reason a salary-plus-dividends combination usually beats an equivalent all-salary package.
- Does salary reduce Corporation Tax?
- Yes. Salary and employer National Insurance are deductible company expenses, so they reduce the profit on which Corporation Tax is charged. Dividends do not, because they are paid out of profit after Corporation Tax.
- How much of a dividend can a director take before dividend tax starts?
- The Dividend Allowance covers the first slice of dividend income tax-free each year — currently £500. It sits on top of your Personal Allowance and applies regardless of your other income.
- Can a single-director company claim Employment Allowance?
- No. Employment Allowance is not available to a company whose only employee earning above the Secondary Threshold is also a director. It can only be claimed if the company has at least one other qualifying employee.
Keep salary and dividend decisions under review
The most tax-efficient mix can change with company profit, other income, Employment Allowance eligibility and changes to tax rates.
It is worth revisiting the split during the year rather than setting it once, particularly if profit differs from what you expected.
You may also find useful
- Dividend Tax CalculatorIncome Tax on your dividends once salary, allowances and tax bands are applied.
- Sole Trader vs Limited Company CalculatorEstimated take-home from the same profit as a sole trader or through a company.
- Corporation Tax CalculatorCompany tax on your profits, including Marginal Relief between £50,000 and £250,000.
- Employee Cost & Employer NI CalculatorThe full annual cost of hiring, including employer National Insurance and pension.
How we calculated it
Salary and employer National Insurance are company expenses, so they reduce the profit charged to Corporation Tax. Dividends are paid from profit after Corporation Tax and are not deductible.
Personally, salary is charged to Income Tax and employee National Insurance. Dividends use any unused Personal Allowance, then the £500 Dividend Allowance, then dividend tax at 10.75%, 35.75% and 39.35% as they stack on top of your other income. The Personal Allowance taper above £100,000 is applied to total income.
Assumptions
A single director-shareholder owning 100% of the shares, a full 12-month tax year, no pension contributions, no student loan, no benefits in kind, and enough distributable reserves to pay the dividends shown. Scottish rates apply to salary but not to dividends, which are taxed at UK-wide rates.
How this calculator works
Most director-shareholders take a modest salary plus dividends. A salary keeps the company's Corporation Tax bill down and, if it is at or above the National Insurance lower earnings level, protects your state pension record. Dividends avoid National Insurance entirely but are paid out of profit that has already suffered Corporation Tax.
Employment Allowance can remove up to £10,500.00 of employer National Insurance, which makes a higher salary more attractive. However, a company whose only employee is a single director paid above the Secondary Threshold cannot claim it. Only tick the option if the company has at least one other employee who qualifies. See the employee cost calculator for how employer NI and pension add up more generally.
Dividend tax itself is worked out on the dividend tax calculator, which covers the Dividend Allowance, the ordinary/upper/additional rates and the Personal Allowance taper in full — this page only summarises how dividends fit alongside a salary.
Worked examples
£60,000 profit, £12,570 salary
A single-director company makes £60,000 profit before the director is paid. Taking a £12,570 salary creates employer NI of 15% on £7,570 = £1,135.50. Profit for Corporation Tax is £60,000 − £12,570 − £1,135.50 = £46,294.50, taxed at 19% = £8,795.96.
That leaves £37,498.54 available as dividends. The salary uses the Personal Allowance, so the Dividend Allowance covers the first slice and the rest is taxed at the ordinary and upper dividend rates as it stacks on top, giving £3,977.34 of dividend tax and a total take-home of £46,091.20.
£60,000 profit, no salary at all
Taking the whole £60,000 as dividends instead avoids employer NI, so Corporation Tax at 19% applies to the full £60,000 = £11,400, leaving £48,600 to distribute. Because there is no salary to use the Personal Allowance, more of the dividend falls into the Dividend Allowance and basic-rate dividend band, but the company has paid £2,604.04 more Corporation Tax than in the salary-plus-dividends scenario above, and the director gets no state pension credit for the year.
Higher profit, £150,000
On £150,000 of company profit with the same £12,570 salary, Corporation Tax rises to 32,368.04 because profit above £50,000 is taxed at the main 25% rate (with marginal relief), and the Personal Allowance starts to taper away once total income passes £100,000. The overall effective rate of tax and NI on the profit is higher than at lower profit levels, which is why the "right" salary/dividend split is not fixed — change the profit field above to see your own numbers.
Key terms explained
- Employment Allowance
- A relief that removes up to £10,500.00 of employer National Insurance from a business's total bill for the year. It's claimed once per business, not per employee, and single-director companies with no other staff can't claim it.
- Dividend Allowance
- The amount of dividend income taxed at 0% each year, currently £500. Dividends above it are taxed at the ordinary, upper or additional dividend rate depending on your total income.
- Distributable reserves
- Accumulated profit after Corporation Tax that a company is legally allowed to pay out as dividends. Paying dividends beyond this amount is not permitted.
Common mistakes
Assuming there is one universally 'optimum' salary
The best split depends on your profit, other income, pension plans, mortgage applications and whether Employment Allowance applies. A figure that suits one director can be wrong for another even at the same profit level.Ticking Employment Allowance for a single-director company
This relief is not available where the only employee paid above the Secondary Threshold is also a director. Ticking it anyway overstates your take-home in the results.Paying dividends without checking distributable reserves
Dividends can only come from accumulated profit after Corporation Tax, not from turnover or a bank balance built up from loans. Paying more than the company has available creates an illegal dividend.Forgetting Scottish Income Tax applies to salary but not dividends
If you're a Scottish taxpayer, Scottish rates and bands apply to your salary, but dividends are still taxed at the UK-wide dividend rates wherever you live.
Common questions
Is it better to take salary or dividends?
In most cases a combination works out best: enough salary to be a deductible company cost and to protect your state pension record, with the balance as dividends to avoid National Insurance. The right split depends on your profit level, other income, pension plans and whether Employment Allowance is available — there is no single answer that suits every director.
Are dividends subject to National Insurance?
No. Dividends never attract employee or employer National Insurance, regardless of amount. This is the main reason combining a modest salary with dividends usually beats taking everything as salary.
Does salary reduce company profit for Corporation Tax?
Yes. Salary and the employer National Insurance on it are deductible business expenses, so they reduce the profit that Corporation Tax is charged on. This is why increasing salary lowers the company's tax bill, even though it increases the director's personal tax.
Are dividends deductible for Corporation Tax?
No. Dividends are a distribution of profit that has already been taxed, paid after Corporation Tax has been calculated, so they never reduce the company's tax bill.
How does the Dividend Allowance affect the salary-versus-dividend split?
It means the first slice of dividend income is taxed at 0% each tax year — currently £500. It applies on top of your Personal Allowance and to everyone who receives dividends, regardless of their other income.
How are dividends taxed in 2026/27?
Dividends use any Personal Allowance not already used by other income, then the Dividend Allowance, then are taxed at 10.75%, 35.75% or 39.35% depending on which tax band they fall into once stacked on top of your other income. See the dedicated dividend tax calculator for a full breakdown.
Does Employment Allowance change the best salary level?
It can. Employment Allowance lets an eligible business reduce its employer National Insurance bill by up to £10,500.00 a year. It is claimed once against the whole payroll, not per employee.
Can dividends exceed company profit?
No, not legally. Dividends can only be paid from distributable reserves — accumulated profit after Corporation Tax. Paying dividends without sufficient reserves creates an illegal dividend, which usually has to be repaid or reclassified, often as a director's loan or salary with extra tax and NI due.
Do I need to declare dividends properly?
Yes. Dividends should be supported by board minutes and a dividend voucher, and paid in proportion to shareholdings unless you hold different share classes. They also need to be reported on your Self Assessment return.
Does other income affect dividend tax?
Yes. Dividends are treated as the top slice of your income, so any salary, rental income, pension income or self-employment profit you have is taxed first, and dividends stack on top and are taxed at whichever bands they reach.
Does Scotland affect the calculation?
Partly. Scottish Income Tax rates and bands apply to a Scottish taxpayer's salary, but dividends are always taxed at the UK-wide dividend rates, regardless of where you live in the UK.
Sources
- Corporation Tax rates and allowances — HMRC
- Income Tax rates and Personal Allowances — GOV.UK
- National Insurance rates and categories — HMRC
- Employment Allowance — GOV.UK
- Tax on dividends — GOV.UK
- Tax on dividends — GOV.UK
Last reviewed: 7 September 2026 · Statutory rates: 2026/27. This calculator is information only and is not tax, accounting or financial advice.