Salary vs dividends calculator

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What is the best salary for a limited company director in 2026/27?

For a one-person company, a salary of £12,570 is often the best choice. It uses the personal allowance, so there is no Income Tax or employee National Insurance, and the company deducts it and its 15% employer National Insurance from its profits. The rest of the profit is then paid as dividends after Corporation Tax.

The calculator's worked example: £60,000.00 of company profit in 2026/27, with the director as the only employee and no other income.

Option	Corporation Tax	Dividends	Take-home
No salary	£12,150.00	£47,850.00	£44,111.15
£5,000 salary	£10,825.00	£44,175.00	£45,293.71
£6,708 salary	£10,304.49	£42,731.31	£45,529.61
£12,570 salary (best)	£8,795.96	£37,498.54	£46,091.20

How the best option works out:

• Employer National Insurance: (£12,570.00 − £5,000) × 15% = £1,135.50.
• Taxable profit: £60,000.00 − £12,570.00 − £1,135.50 = £46,294.50, and Corporation Tax on it is £8,795.96.
• Dividends: the £46,294.50 left, less Corporation Tax, is £37,498.54.
• Dividend tax: £500 at 0%, £36,998.54 at 10.75% = £3,977.34.
• Take-home: £12,570.00 + £37,498.54 − £3,977.34 = £46,091.20.

How much tax do you pay on dividends in 2026/27?

Dividends above the £500 dividend allowance are taxed at 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band in 2026/27, up from 8.75% and 33.75% in 2025/26. Dividends sit on top of your other income to decide the band.

Dividends	2025/26	2026/27
Dividend allowance (taxed at 0%)	£500	£500
Basic rate band	8.75%	10.75%
Higher rate band	33.75%	35.75%
Additional rate band	39.35%	39.35%

Sources: GOV.UK: Tax on dividends; HMRC: Income Tax rates and allowances; HMRC: dividend rates from April 2026.

What National Insurance is paid on a director's salary?

The company pays 15% employer National Insurance on a director's salary above £5,000 a year. The director pays 8% on salary between £12,570 and £50,270, and 2% above that. Directors use an annual earnings period, so these yearly figures apply however the salary is paid.

Class 1 National Insurance	2025/26	2026/27
Lower earnings limit (counts for State Pension)	£6,500	£6,708
Secondary threshold (employer pays above)	£5,000	£5,000
Primary threshold (employee pays above)	£12,570	£12,570
Upper earnings limit	£50,270	£50,270
Employer rate	15%	15%
Employee rate (then above the upper limit)	8% (2%)	8% (2%)
Employment Allowance	£10,500	£10,500

Sources: HMRC rates and thresholds for employers 2025 to 2026 and 2026 to 2027; HMRC CA44: National Insurance for company directors.

Can a one-person company claim the Employment Allowance?

No. If the only employee paid over the £5,000 secondary threshold is the company's sole director, the company can't claim the Employment Allowance, so it pays employer National Insurance in full. With another employee paid over that, it can take up to £10,500 a year off its employer National Insurance bill.

With the allowance, a bigger salary can sometimes beat dividends, because the salary is deducted from profits that would otherwise pay Corporation Tax. The calculator searches every salary to the penny, so it shows that salary when it leaves you £1 or more extra, often the one that brings the company's profit down to the small profits limit (GOV.UK: Employment Allowance eligibility).

What should you check before paying yourself a dividend?

A company can only pay dividends out of profits available for distribution, after Corporation Tax and any earlier losses, and each dividend needs a directors' decision and a dividend voucher. Money taken out that isn't a salary, a dividend or an expense becomes a director's loan, which can bring section 455 tax for the company.

Our guide explains how to pay a dividend from a limited company, and the director's loan s.455 tax calculator shows the tax if a loan is still owed at the year end (GOV.UK: Taking money out of a limited company).

How does this salary and dividend calculator work?

Enter the company's profit before your salary. The calculator searches every salary the profit can pay, to the penny, working out National Insurance, Corporation Tax with marginal relief, Income Tax and dividend tax, with the rest paid as dividends. It shows the best mix, or a usual level within £1 of it, next to the usual levels.

• Tax years: 2025/26 and 2026/27, with every rate checked against GOV.UK. The company's year is taken as 1 April to 31 March alongside the tax year.
• Where you live: England, Wales and Northern Ireland share the same Income Tax rates for these years. Scottish taxpayers answer yes to the Scotland question: their salary uses the Scottish bands, and dividends stay at UK rates (GOV.UK: Scottish Income Tax).
• Left out: pension contributions (see the limited company pension calculator), student loans, benefits in kind, the High Income Child Benefit Charge, and profit kept in the company.
• Corporation Tax comes from the same engine as our Corporation Tax calculator. Not sure about a company at all? Try the sole trader or limited company calculator.
• Our guide salary or dividends: how should a company director pay themselves? walks through the same choice in words.

This is general information, not tax advice. When the year ends, the salary and dividends go into the company's accounts and its Company Tax Return (CT600).

Which rules does this calculator follow?

Every figure comes from the rules HMRC and Companies House publish on GOV.UK, and from the legislation behind them. The links below go to the pages we checked when we last reviewed this calculator, so you can read each rule in full and check that it applies to your company.

• HMRC: Income Tax rates and allowances for current and previous tax years
• GOV.UK: Tax on dividends
• HMRC: Rates and thresholds for employers 2026 to 2027
• HMRC: CA44 National Insurance for company directors
• GOV.UK: Employment Allowance, check if you're eligible
• GOV.UK: Corporation Tax rates and reliefs
• GOV.UK: Taking money out of a limited company
• HMRC: Income Tax changes to tax rates for property, savings and dividend income (dividend rates from April 2026)

Frequently asked questions

Is it better to take salary or dividends from a limited company?

Usually a mix of both. For a one-person company, a salary up to the £12,570 personal allowance with the rest as dividends often leaves the most, because that salary is free of Income Tax and employee National Insurance and the company deducts it from its profits. Dividends carry no National Insurance, but they are paid from profit after Corporation Tax.

What is the dividend allowance for 2026/27?

It is £500. Dividends within it are tax-free but still count as income when working out your tax band. Above it, dividends are taxed at 10.75%, 35.75% or 39.35% in 2026/27, compared with 8.75%, 33.75% and 39.35% in 2025/26.

Why pay a salary of £12,570 rather than £5,000?

The extra £7,570 of salary costs 15% employer National Insurance, £1,135.50, but the company deducts both the salary and that National Insurance from its profits, saving Corporation Tax at 19% or more, and the salary is free of Income Tax. For a one-person company this usually comes out ahead. A salary of at least £6,708 also counts towards your State Pension.

Do I pay National Insurance on dividends?

No. Neither you nor the company pays National Insurance on dividends. That is the main reason a small salary plus dividends usually costs less overall than taking everything as salary, even though dividends come out of profit that has already paid Corporation Tax and are then taxed again above the dividend allowance.

Do Scottish taxpayers pay different tax on dividends?

No. Scottish Income Tax rates apply to salary, pensions and other non-savings income, but dividends are taxed at the same UK rates and in the same UK bands for everyone. A Scottish director's salary is still taxed in the Scottish bands, so the calculator asks whether you pay Scottish Income Tax.

Can the company deduct dividends from its profits?

No. Dividends are paid out of profit after Corporation Tax and are not a business cost. Salary, employer National Insurance and employer pension contributions are deductible, which is why the calculator works out the company's Corporation Tax again for each salary level before it pays out the rest as dividends.

Related free tools

• Corporation Tax calculator: Estimates the Corporation Tax a UK limited company pays on its taxable profits for one accounting period of up to 12 months. Applies the small profits rate, the main rate and marginal relief, with associated companies, short periods and periods that straddle 1 April. A close investment-holding company pays the main rate on all its profits. Returns the tax, the effective rate and the payment and filing dates.
• Corporation Tax deadline calculator: Works out a UK private limited company's Corporation Tax payment date, CT600 filing deadline and Companies House accounts deadline from its accounting period. Accounts longer than 12 months are split into two Corporation Tax periods, each with its own payment date.
• Corporation Tax late filing penalty and interest calculator: Works out HMRC's penalties for filing a UK company's Company Tax Return (CT600) late — the flat £200/£400 penalties for filing deadlines from 1 April 2026 (£100/£200 before then), and the 10% or 20% tax-geared penalty — plus late payment interest on the Corporation Tax at HMRC's published rates.
• All free Corporation Tax tools

Last reviewed 15 October 2026. This calculator gives general guidance, not tax advice.