About the UK Director Salary vs Dividend Calculator
This UK director salary vs dividend calculator works out how much a limited company director takes home from the company’s profit, and which salary level leaves the most in your pocket for the 2026/27 tax year. Enter the company’s profit before paying you, choose whether to let the calculator find the optimal salary or test your own figure, and say whether the company can claim the Employment Allowance.
It models every layer of tax: employer National Insurance at 15% above £5,000 (less the £10,500 Employment Allowance where available), corporation tax at 19%–25% with marginal relief on what is left, employee NI at 8% and 2%, income tax on salary, and dividend tax at 10.75%, 35.75% and 39.35% after the £500 dividend allowance. All remaining post-tax profit is assumed to be paid out as dividends.
It is meant for one-person and family limited companies weighing a small salary against dividends. Figures assume England, Wales or Northern Ireland income tax bands, a single company with no associated companies, a 12-month accounting period and no other personal income. Sole-director companies with no other employees cannot claim the Employment Allowance; where it is switched on, the full £10,500 is assumed to be available for the director’s salary, although other staff’s employer NI uses it up first in practice.
With the default inputs, the your total take-home is £46,091.20. Change any value above to recalculate instantly.
How to use the uk director salary vs dividend calculator
- 1Enter the company’s annual profit before paying yourself a salary.
- 2Leave the salary on “optimal” or choose your own salary to test it.
- 3Switch on the Employment Allowance only if someone other than the sole director is paid above £5,000.
- 4Read your take-home and the tax at each layer.
- 5Compare strategies in the table and the take-home curve in the chart.
Formula and method
Salary and employer National Insurance are deductible for corporation tax. Employer NI is 15% of salary above the £5,000 secondary threshold, reduced by up to £10,500 if the Employment Allowance applies. The remaining profit is charged corporation tax at 19% up to £50,000, 25% above £250,000 and with marginal relief (3/200) in between, and everything left is paid as dividends.
Personally, employee NI is 8% of salary between £12,570 and £50,270 and 2% above. The £12,570 personal allowance (tapered above £100,000) is set against salary first, then dividends. Salary uses the 20%/40%/45% bands and dividends sit on top, with £500 at 0% and the rest at 10.75%, 35.75% or 39.35%. The optimiser tests salaries in small steps and keeps the one with the highest take-home.
- Employer NI
- 15% × (salary − £5,000), less Employment Allowance if eligible
- Employee NI
- 8% of salary £12,570–£50,270 plus 2% above
- Corporation tax
- 19%–25% with marginal relief on profit after salary and employer NI
Worked examples
£60,000 profit, sole director, optimal mix
A £12,570 salary costs £1,135.50 employer NI (15% above £5,000) and is free of income tax and employee NI. Company profit of £46,294.50 pays 19% corporation tax (£8,795.96), leaving £37,498.55 of dividends. After the £500 allowance, £36,998.55 is taxed at 10.75% (£3,977.34), so take-home is £46,091.21.
Test a £5,000 salary on the same profit
No employer NI is due, but company profit of £55,000 now falls in the marginal relief band: £13,750 at 25% less £2,925 relief = £10,825. Dividends of £44,175 use the remaining £7,570 personal allowance and £500 allowance, with £36,105 at 10.75% (£3,881.29), giving £45,293.71 — about £800 less.
£100,000 profit with Employment Allowance
With the Employment Allowance, a £75,000 salary carries no employer NI (15% × £70,000 = £10,500, fully covered). Income tax is £17,432 and employee NI £3,510.60. The remaining £25,000 profit pays £4,750 corporation tax, and the £20,250 dividend is taxed at 35.75% after the £500 allowance (£7,060.63). Take-home is £67,246.78 — about £1,500 more than a £12,570 salary would give.
Frequently asked questions
What is the most tax-efficient director salary for 2026/27?+
For most single-director companies without the Employment Allowance it is £12,570: the salary is free of income tax and employee NI, and although it costs some employer NI, that is deductible for corporation tax. With the Employment Allowance, employer NI is covered on salary up to £75,000, so a higher salary often wins once dividends would be taxed at the higher rate.
Why are dividends taxed less than salary?+
Dividends carry no National Insurance and have lower personal rates (10.75%, 35.75%, 39.35%), but they are paid from profit that has already suffered corporation tax of 19%–25%. The combined burden is still usually lower than salary plus employer and employee NI.
Can a sole director claim the Employment Allowance?+
No. A company whose only employee paid above the secondary threshold is a director cannot claim the Employment Allowance. It needs at least one other employee, such as a second director or staff member, paid above £5,000.
Do I need a salary to get the State Pension?+
A salary at or above the Lower Earnings Limit (£6,708 for 2026/27) earns a qualifying National Insurance year without paying NI below £12,570. Dividends alone do not build State Pension entitlement.
Can I pay dividends if the company has no profit?+
No. Dividends can only be paid from distributable reserves (accumulated post-tax profits). Paying dividends without reserves is unlawful and may be treated as salary or a director’s loan.
Tax results are estimates based on published rules and simplified assumptions. They are not tax advice — check official guidance or a tax professional for your situation.
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