Salary vs dividend calculator 2026/27
You have profit in the company and want to take some or all of it personally. This calculator compares different combinations of salary and dividends to see how much reaches you after Income Tax, National Insurance and Corporation Tax. It uses 2026/27 UK tax rates.
2026/27 UK ratesRates checked 16/09/2026No sign-up required
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Every salary level compared
Highlighted row leaves you with the most.Where the profit goes at the highest take-home in this comparison
Built and reviewed by Luvero Accounting
- Reviewed by Dan Edwards FMAAT
- AAT licensed accountancy practice, Bawtry, South Yorkshire
- Tax rates last reviewed 16/09/2026
- How the calculators work
What this calculator works out
It starts from one year's company profit and runs the same profit through several salary levels. For each one it deducts the salary and employer National Insurance, charges Corporation Tax on what is left, pays the remainder out as a dividend, and then works out your personal Income Tax, dividend tax and employee National Insurance. The row that leaves you with the most is highlighted.
How the calculation works
Salary is deductible for Corporation Tax, so every pound of it saves the company 19 to 26.5 per cent. But salary above £5,000 carries employer National Insurance at 15 per cent, salary above £12,570 carries employee National Insurance at 8 per cent, and it is taxed as ordinary income at 20, 40 or 45 per cent. Dividends carry no National Insurance at all and are taxed at the lower dividend rates of 10.75, 35.75 and 39.35 per cent, but they are paid out of profit that has already borne Corporation Tax.
The usual landing spot is a salary somewhere around the National Insurance thresholds, with the rest taken as dividends. Where exactly depends on your other income, whether the Employment Allowance is available, whether the company is in the marginal relief band, and what the salary does for your State Pension record. A salary at or above the Lower Earnings Limit (£6,708 in 2026/27) earns a qualifying year for the State Pension even where no National Insurance is actually paid.
Under More options you can enter an employer pension contribution. Employer pension contributions are often save tax because qualifying contributions reduce taxable company profits and do not normally attract employer or employee National Insurance. Pension limits and your wider circumstances still need considering. The contribution is taken off the profit before Corporation Tax and shown separately: it is money for later rather than now, so it is not added to your take-home.
Worked example: £80,000 company profit
One director, no other income, no Employment Allowance, 2026/27 rates. The same £80,000 is taken three ways. Figures are rounded to the nearest pound.
| Low salary | Personal Allowance salary | Higher salary | |
|---|---|---|---|
| Salary | £5,000 | £12,570 | £30,000 |
| Employer National Insurance | £0 | £1,136 | £3,750 |
| Corporation Tax | £16,125 | £13,818 | £8,788 |
| Dividend | £58,875 | £52,476 | £37,463 |
| Dividend tax | £8,863 | £9,282 | £8,272 |
| Income Tax on salary | £0 | £0 | £3,486 |
| Employee National Insurance | £0 | £0 | £1,394 |
| Personal take-home | £55,012 | £55,765 | £54,311 |
| Company cost | £80,000 | £80,000 | £80,000 |
On these facts the £12,570 salary comes out ahead by £753 over the £5,000 salary and by £1,454 over £30,000, because the extra salary saves 26.5 per cent Corporation Tax and costs 15 per cent employer National Insurance, with the salary itself covered by the Personal Allowance. None of the three always comes out ahead. Tick the Employment Allowance and the gap widens; add £20,000 of rental income and the Personal Allowance is already used, which changes the answer again; take the profit to £300,000 and the Corporation Tax saving on salary drops to 25 per cent. A salary of £5,000 also sits below the Lower Earnings Limit of £6,708, so it does not earn a State Pension qualifying year, which some directors value more than the £753.
Salary and dividend questions
Which director salary leaves the most after tax in 2026/27?
For a sole director with no other income the two salaries most often compared are £5,000, the point at which employer National Insurance starts, and £12,570, the Personal Allowance and the point at which employee National Insurance starts. In the £80,000 example above £12,570 leaves £753 more, because the Corporation Tax saved on the extra salary outweighs the employer National Insurance on it.
The answer moves with your circumstances. If the company can claim the Employment Allowance the employer National Insurance disappears and a higher salary looks better still. If you have other income using up your Personal Allowance, a lower salary may win. A £5,000 salary is below the Lower Earnings Limit of £6,708, so it does not count towards your State Pension. This calculator shows the arithmetic; it is not a recommendation.
Do dividends still cost less tax than salary?
For most owner-managed companies a low salary topped up with dividends still leaves more in your pocket than the same amount taken entirely as salary, because dividends attract no National Insurance. Employer National Insurance alone is 15 per cent on salary above £5,000, and employee National Insurance adds 8 per cent above £12,570.
The gap has narrowed. The ordinary and upper dividend rates rose by two percentage points from 6 April 2026, to 10.75 and 35.75 per cent, and dividends come out of profit that has already paid Corporation Tax at up to 25 per cent. In the example above a £50,270 salary leaves £51,831 against £55,765 on a £12,570 salary, so the mix still matters, but the case is less one-sided than it was.
How are dividends taxed in 2026/27?
The first £500 of dividends is covered by the dividend allowance. Above that, dividends falling in the basic rate band are taxed at 10.75 per cent, in the higher rate band at 35.75 per cent, and in the additional rate band at 39.35 per cent. Dividends are treated as the top slice of your income, so your salary and any other income use up the Personal Allowance and the basic rate band first.
No tax is deducted when the dividend is paid. It is collected through Self Assessment, normally by 31 January after the end of the tax year, with payments on account if the bill is large enough.
Does a sole director qualify for Employment Allowance?
No. A company cannot claim the Employment Allowance if its only employee paid above the £5,000 secondary threshold is also a director. That rules out most one-person companies. If the company has at least one other employee earning above the threshold, it can usually claim, and the allowance then wipes out up to £10,500 of employer National Insurance for the year.
The previous rule barring employers with more than £100,000 of National Insurance liabilities was removed from April 2025, so the size of the payroll is no longer a bar.
Do dividends reduce Corporation Tax?
No. Dividends are paid out of profit after Corporation Tax, so they have no effect on the company's tax bill. Salary, employer National Insurance and employer pension contributions are the payments to a director that are deductible in working out taxable profit.
Should I make an employer pension contribution instead?
Employer pension contributions are often save tax because qualifying contributions reduce taxable company profits and do not normally attract employer or employee National Insurance. Pension limits and your wider circumstances still need considering. The money is also locked away until at least age 55, rising to 57 from April 2028, so a contribution is a different decision from taking income now.
Enter a contribution under More options to see its effect on the company's Corporation Tax and on the dividends left. The annual allowance and its taper are not checked. Whether a contribution suits you is a conversation for your accountant and a regulated financial adviser.
What happens when my total income exceeds £50,270?
£50,270 is the Personal Allowance of £12,570 plus the £37,700 basic rate band. Above it salary is taxed at 40 per cent rather than 20, and dividends at 35.75 per cent rather than 10.75. Employee National Insurance drops from 8 to 2 per cent at the same point. Because dividends sit on top of your other income, it is usually the dividends that cross the line first, which is why the tax on the last part of a dividend can be more than three times the tax on the first part.
What happens when my income exceeds £100,000?
Your Personal Allowance is withdrawn at £1 for every £2 of income over £100,000, and it has gone completely at £125,140. Every pound of income in that range is taxed at the higher rate and also removes 50p of tax-free allowance, so the effective rate on salary in the band is 60 per cent, and on dividends it is well above the 35.75 per cent headline rate. From £125,140 the additional rates of 45 per cent on salary and 39.35 per cent on dividends apply.
If your calculation lands in this range, the timing of dividends across tax years and the use of pension contributions can change the outcome materially. The calculator shows the position on the figures you enter; it cannot plan around them.