How we calculate

A tax calculator is only useful if you can trust the number. So rather than ask you to take our word for it, this page sets out exactly what the calculators do, and shows their answers next to worked examples published by ACCA, the professional body for accountants, and the rules on gov.uk. The results below are worked out live by the same code that runs the calculators, so they can't drift apart. Both calculators share that code, so every check below applies to both.

The rules the corporation tax calculators follow

1. Split the period by financial year. Corporation tax rates are set for financial years that run from 1 April to 31 March. If your accounting period crosses 31 March, profit is split between the two years by the number of days in each.
2. Work out augmented profits. Taxable profit plus any dividends received from companies outside your group. Augmented profits decide the band; only taxable profit is taxed.
3. Set the limits. The £50,000 and £250,000 limits are divided by the number of associated companies plus one. For a period shorter than 12 months they are cut in proportion to its length in days, divided by 365. For a full 12-month period they stay at the full amount, even in a leap year, and are shared between the financial years by days.
4. Find the band. At or below the lower limit, the small profits rate applies. At or above the upper limit, the main rate applies. In between, the main rate applies less marginal relief. Before 1 April 2023 every company paid a flat 19%.
5. Work out marginal relief. 3/200 × (upper limit − augmented profits) × (taxable profit ÷ augmented profits), for each financial year in the period.
6. Add it up and set the dates. Tax for each part is added together. Payment is due 9 months and 1 day after the period ends, and the Company Tax Return 12 months after it ends.

Results are shown to the penny. Published examples round to whole pounds, so differences of less than £1 are expected and count as a pass.

The rules the dividend tax calculator follows

1. Order the income. Salary, pension and other non-savings income come first, then savings interest, then dividends on top, as HMRC requires.
2. Set the personal allowance. £12,570, reduced by £1 for every £2 of total income above £100,000. It's used against non-savings income first, then savings, then dividends.
3. Apply the savings allowances. The starting rate for savings and the Personal Savings Allowance are taxed at 0% but still use up the bands.
4. Apply the dividend allowance. The first £500 of dividends is taxed at 0% and also uses up the band it falls in.
5. Tax each band. Remaining dividends are taxed at the basic, higher or additional dividend rate for the band they fall in. Tax in each band is rounded down to the penny.
6. Scottish taxpayers. Dividend and savings tax use UK rates and bands. Tax on non-savings income uses Scottish rates, so the calculator leaves it out for Scottish taxpayers.

The rules the salary vs dividend calculator follows

1. Employer National Insurance. 15% of salary above the £5,000 annual secondary threshold, less up to £10,500 of Employment Allowance when the company can claim it.
2. Corporation tax. Salary and employer NI come off profit, then the corporation tax engine above works out the tax for the matching financial year.
3. Dividends. All profit after corporation tax is paid out as dividends in the same tax year.
4. Employee National Insurance. 8% of salary between £12,570 and £50,270 and 2% above, using the annual earnings period for directors.
5. Income and dividend tax. The dividend tax engine above works out tax on the salary and dividends together, plus any other income.
6. Best salary. Every salary from nil to the most the company can afford is tested, and the one with the highest take-home pay is shown. If a standard salary such as £12,570 comes within £1 of it, the standard salary is shown instead.

The rules the employer NI calculator follows

1. Find the threshold. £5,000 a year for most employees, £50,270 for under-21s, apprentices under 25 and veterans in their first year of civilian work, and £25,000 for eligible Freeport and Investment Zone employees.
2. Employer National Insurance. 15% of annual salary above the threshold, rounded to the penny for each employee, then multiplied by the number of employees.
3. Employment Allowance. Up to £10,500 comes off the total employer NI, never more than the bill itself.
4. Workplace pension. The employer rate you enter, on qualifying earnings (£6,240 to £50,270) or on the whole salary. No National Insurance is charged on it.
5. Budget mode. The highest salary, to the penny, whose total cost per employee is no more than the budget you enter.