Dividend vs Salary Calculator
How much a limited company director keeps by taking a small salary and the rest as dividends, compared with paying it all as salary, using current Corporation Tax, NI and dividend rates.
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- 2026/27 rates, reviewed 2nd September 2026
Dividend vs Salary Calculator
Enter your figures to see results.
Should I pay myself in salary or dividends?
For most owner-directors the answer is still a small salary plus dividends, but the gap has narrowed. A sole director with £80,000 of profit who takes a £12,570 salary and the rest as dividends keeps about £55,800, roughly £4,500 more than taking it all as salary. Employer National Insurance at 15% is what makes salary expensive; dividend tax rates rose by two points in April 2026, which is why the advantage is smaller than it used to be.
How to use this calculator
- Enter the company's profit for the year before any payment to you, after all other costs.
- Enter the salary you plan to take. £12,570 uses your full personal allowance and counts for the State Pension; the calculator compares whatever you choose with an all-salary alternative.
- Add any other personal income, and untick the sole-director box if the company has other employees so the Employment Allowance can be applied.
What your result means
How to read the figure, what counts as normal, and what to do about it.
Why the two routes are taxed so differently
Salary is a cost to the company, so it reduces Corporation Tax, but it attracts employer National Insurance at 15% above £5,000, employee NI at 8% above £12,570 and income tax at 20%, 40% or 45%.
Dividends are paid out of profit after Corporation Tax (19% to 25%), so the company has already paid tax on them. There is no National Insurance on dividends, and the personal rates are lower: 10.75% in the basic-rate band, 35.75% higher, 39.35% additional, after a £500 allowance.
The trade-off is therefore Corporation Tax plus dividend tax against income tax plus two lots of NI. Because employer NI alone is 15%, dividends usually win, but the margin depends on the company's profit level (which sets its Corporation Tax rate) and your income band.
Rates used for 2026/27
| Tax | Rate |
|---|---|
| Corporation Tax, profits up to £50,000 | 19% |
| Corporation Tax, profits over £250,000 | 25% |
| Corporation Tax, £50,000 to £250,000 | Marginal relief, effectively 26.5% on the slice |
| Employer NI | 15% above £5,000 |
| Employee NI | 8% from £12,570 to £50,270, then 2% |
| Dividend allowance | £500 |
| Dividend tax: basic / higher / additional | 10.75% / 35.75% / 39.35% |
| Employment Allowance (not sole-director companies) | £10,500 |
Things the numbers do not show
- Pension. Employer pension contributions are usually the most tax-efficient extraction of all: no NI, no income tax, and deductible for Corporation Tax. Consider them before large dividends.
- Dividends need profit. They can only be paid from distributable reserves. Paying dividends the company cannot afford makes them illegal and repayable.
- Mortgages and borrowing. Lenders assess salary and dividends, but a very low salary can complicate affordability checks.
- Two directors or a spouse. Splitting shareholdings so that two people use two allowances and two basic-rate bands often saves more than any salary tweak, provided the shares are real and the dividends are theirs.
- Paperwork. Dividends need board minutes and vouchers for every payment. Salary needs a PAYE scheme and RTI submissions even at £12,570.
Worked example: a sole-director consultancy with £80,000 profit
Salary + dividends. Salary £12,570 attracts £1,135 of employer NI and no income tax or employee NI. Profit after salary and NI is £66,295; Corporation Tax with marginal relief is £13,818, leaving £52,476 to pay as a dividend. Dividend tax: £500 tax-free, £37,200 at 10.75% and £14,776 at 35.75%, a total of £9,282. Take-home: £55,765.
All salary. The whole £80,000 supports a gross salary of about £70,217 plus £9,783 of employer NI. Income tax £15,519 and employee NI £3,415 leave £51,283.
The salary-plus-dividends route keeps about £4,480 more. Before the April 2026 dividend rate rise the gap would have been over £5,500.
Frequently asked questions
What is the best salary for a director in 2026/27?
£12,570 for most sole directors. It uses the personal allowance in full, is above the Lower Earnings Limit for State Pension credits, and attracts only employer NI of £1,135, which is itself deductible for Corporation Tax. Companies eligible for the Employment Allowance pay no NI on it at all.
Why has the advantage of dividends shrunk?
Three changes: the dividend allowance fell from £2,000 to £500, Corporation Tax rose from 19% to up to 25% in 2023, and the basic and higher dividend rates rose by two points in April 2026. Employer NI at 15% keeps dividends ahead, but by less.
Can I pay dividends monthly?
Yes, provided the company has distributable profit each time and each payment is minuted and documented with a dividend voucher. Regular equal payments that look like salary can be challenged, so keep the paperwork right.
What about paying my spouse a salary or dividends?
A genuine salary for genuine work is deductible and uses their allowances. Dividends on shares they own outright are theirs to receive and taxed at their rates. Arrangements designed purely to divert income can be challenged under the settlements legislation; take advice.
The maths behind this calculator
For anyone who wants to check the working or rebuild it in a spreadsheet.
The calculation
Route A: salary + dividends Employer NI = (Salary − £5,000) × 15% (less Employment Allowance if eligible) Taxable profit = Profit − Salary − Employer NI Corporation Tax = 19% up to £50k; 25% above £250k; marginal relief between Dividends = Taxable profit − Corporation Tax Personal tax = Income tax and employee NI on salary + dividend tax on dividends Take-home = Salary + Dividends − Personal tax Route B: everything as salary Gross salary = the salary at which Salary + Employer NI = Profit Take-home = Gross salary − Income tax − Employee NI
Assumptions and limits
- You are UK-resident and taxed at rUK (England, Wales, Northern Ireland) rates; Scottish income tax rates on salary would change the salary route slightly. Dividend rates are UK-wide.
- All post-tax profit is paid out as dividends in the same year. Retaining profit in the company defers, but does not remove, the dividend tax.
- No pension contributions, benefits in kind or student loan. The Corporation Tax calculation assumes a single company with no associated companies (which would reduce the marginal relief limits).
- The all-salary route uses the full profit for salary and employer NI, leaving no profit and therefore no Corporation Tax.
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