Salary vs Dividend Calculator
Find the mix of salary and dividends that leaves you the most after every tax for 2026/27, from corporation tax to your own dividend tax.
- £12,570usual best salary
- 15%employer NI
- 10.75%basic dividend tax
- Dividends
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- Your take-home pay
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- Per month
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- Company taxes
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- Your taxes
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- Total tax
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- Total tax rate
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- Better than all dividends by
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Matches published worked examples · Rates checked 3 November 2026 · Not affiliated with HMRC · How we calculate
Compare your options
Take-home pay for each way of paying yourself, with all remaining profit paid as dividends.
| Option | Salary | Dividends | Company taxes | Your taxes | Take-home | vs best |
|---|
Your take-home pay at every salary
How much you keep for each salary level, with the rest of the profit paid as dividends. The best point is marked.
- Take-home pay
- Best salary
Enter your company's profit and this salary vs dividend calculator works out every tax between the company and your bank account: corporation tax, employer and employee National Insurance, income tax and dividend tax. It compares the common ways of paying yourself, finds the salary that leaves you the most, and shows the working. Think of it as a limited company tax calculator for directors, built for the 2026/27 rates. Whether you call it a dividend vs salary calculator or a salary and dividend tax calculator, the question it answers is the same: how should you pay yourself?
Salary vs dividends: which is better?
For most directors the answer is both: a salary up to £12,570 and the rest as dividends. The salary is free of income tax and employee National Insurance because it sits within your personal allowance, and it reduces the company's corporation tax.
Above £12,570, salary gets expensive. You pay 20% income tax and 8% employee NI, and the company pays 15% employer NI. Dividends have no National Insurance at all. They come out of profit after corporation tax and you pay 10.75% dividend tax in the basic rate band, which usually works out cheaper overall.
On £60,000 of profit, a £12,570 salary leaves you £46,091.20. Taking everything as salary leaves £41,196.53, and taking everything as dividends £44,111.15.
The most tax-efficient salary for 2026/27
Three salary levels come up again and again. Here's how they compare for a sole director on £60,000 of profit:
| Salary | Why people choose it | Take-home |
|---|---|---|
| £5,000 | No employer NI | £45,293.72 |
| £6,708 | Lowest salary for a State Pension year | £45,529.61 |
| £12,570 | Uses your personal allowance | £46,091.20 |
£12,570 wins by £797.48 over £5,000, even though the company pays £1,135.50 of employer NI. The salary and the NI both come off profit before corporation tax, and the salary reaches you tax-free. Guides that recommend £6,708 or £5,000 often leave that corporation tax saving out.
Salary and dividend tax rates compared (2026/27)
The tax on each extra £1 depends on your income tax band. Salary is taxed through PAYE; dividends come out of profit that has already had corporation tax taken off.
| Your band | Salary: you pay | Salary: company pays | Dividends: company pays first | Dividends: you pay |
|---|---|---|---|---|
| Basic rate | 20% income tax + 8% NI | 15% employer NI | 19%–25% corporation tax | 10.75% |
| Higher rate | 40% income tax + 2% NI | 15% employer NI | 19%–25% corporation tax | 35.75% |
| Additional rate | 45% income tax + 2% NI | 15% employer NI | 19%–25% corporation tax | 39.35% |
Salary and employer NI are business costs, so they reduce corporation tax. Dividends don't. That's why the overall comparison needs the calculator rather than the headline rates.
Salary vs dividends: pros and cons
| Compared on | Salary | Dividends |
|---|---|---|
| National Insurance | Employee and employer NI above the thresholds | None |
| Corporation tax | Reduces the company's bill | Paid from profit after corporation tax |
| State Pension | Counts from £6,708 a year | Doesn't count |
| Personal pension tax relief | Counts as earnings, so you can get relief on contributions up to your salary | Not earnings, so it doesn't raise the limit |
| When you can take it | Regular and predictable, even in a loss-making year | Only when the company has enough retained profit |
| Paperwork | A payroll scheme and reports to HMRC each time you're paid | A board minute and a dividend voucher for each payment |
| Mortgages | Simple to evidence with payslips | Usually assessed from your last two years' tax calculations |
Planning your pay for the year
Most directors set the salary once, at the start of the tax year, and run it through payroll monthly. Dividends are then paid during the year as the profit comes in, usually quarterly or when there's a clear surplus. Before 5 April, and again before your company's year end, check where you stand: whether you're close to the higher rate band or the £100,000 line, whether a pension contribution would help, and whether to leave some profit in the company for next year.
Rates change most years, so review the mix each April. For 2026/27 the dividend rates went up by 2 percentage points while corporation tax and National Insurance stayed the same, which slightly narrows the gap between salary and dividends but doesn't change the usual answer.
Best salary and take-home pay by company profit (2026/27)
The best salary for a sole director at common profit levels, with all remaining profit paid as dividends in the same year.
| Company profit | Best salary | Dividends | Take-home | Total tax | Tax rate | vs £12,570 salary |
|---|---|---|---|---|---|---|
| £20,000 | £12,570 | £5,098.54 | £17,174.20 | £2,825.80 | 14.13% | – |
| £30,000 | £12,570 | £13,198.54 | £24,403.45 | £5,596.55 | 18.66% | – |
| £40,000 | £12,570 | £21,298.54 | £31,632.70 | £8,367.30 | 20.92% | – |
| £50,000 | £12,570 | £29,398.54 | £38,861.95 | £11,138.05 | 22.28% | – |
| £60,000 | £12,570 | £37,498.54 | £46,091.20 | £13,908.80 | 23.18% | – |
| £80,000 | £12,570 | £52,476.46 | £55,764.88 | £24,235.12 | 30.29% | – |
| £100,000 | £12,570 | £67,176.46 | £65,209.63 | £34,790.37 | 34.79% | – |
| £150,000 | £5,000 | £110,325 | £85,321.17 | £64,678.83 | 43.12% | + £211.26 |
| £200,000 | £131,086 | £40,500.81 | £106,022.48 | £93,977.52 | 46.99% | + £257.43 |
| £300,000 | £218,042 | £40,501.25 | £152,109.42 | £147,890.58 | 49.3% | + £1,436.43 |
No Employment Allowance, no associated companies, no other income, and outside Scotland. Total tax includes corporation tax, both kinds of National Insurance, income tax and dividend tax. At high profits a larger salary can come out slightly ahead, but the gain is small compared with leaving profit in the company or paying into a pension, which this table doesn't include.
How this limited company tax calculator works
Every option goes through the same steps, first in the company and then for you personally. The calculator shows them for the best option above. It also works as a limited company salary calculator: type the salary you're considering into the "Compare a salary of" box and it's added to the comparison table.
- 1
Pay the salary
Your salary and any employer NI on it come off the company's profit. Employer NI is 15% of salary above £5,000, less the Employment Allowance if the company can claim it.
- 2
Pay corporation tax
The company pays 19% to 25% on what's left, with marginal relief in between. Our corporation tax calculator shows this part in detail.
- 3
Pay the rest as dividends
Profit after corporation tax is paid to you as dividends. You then pay employee NI on the salary, income tax and dividend tax. Our dividend tax calculator explains that step.
Salary and dividend worked examples
Four directors, each worked out by the calculator above for 2026/27.
Sole director · £60,000 profit
The usual answer: £12,570 salary
Salary £12,570, employer NI £1,135.50, corporation tax £8,795.96 and dividends £37,498.54. After £3,977.34 of dividend tax, the director takes home £46,091.20, £1,980.05 more than with no salary.
With a second employee · £60,000 profit
With the Employment Allowance
Because another employee is paid over £5,000, the company can claim the Employment Allowance, so there's no employer NI on the director's £12,570 salary. The director's take-home rises to £46,732.51, £641.31 more than without it.
High earner · £150,000 profit
When a lower salary wins
With income over £100,000, the director loses most of the personal allowance, so salary above £5,000 is taxed. The best salary drops to £5,000, giving £85,321.17, £211.26 more than a £12,570 salary.
Very profitable · £250,000 profit
When a bigger salary wins
Here the company is in the marginal relief band, where each £1 of salary saves 26.5% corporation tax, while extra dividends are taxed at 39.35%. The best salary is £174,566, which brings company profit down to the £50,000 lower limit and leaves £129,065.94, £1,012.01 more than a £12,570 salary.
Employment Allowance and your salary
The Employment Allowance lets a company take up to £10,500 a year off its employer National Insurance bill. A company can't claim it if a single director is the only employee paid above £5,000, which rules out most one-person companies.
If there's a second director, or an employee paid above that threshold, the company can claim it. Tick the box in the advanced options and the calculator takes it into account. A £12,570 salary then has no employer NI at all.
Your salary and the State Pension
A salary of at least £6,708, the Lower Earnings Limit, gives you a qualifying year for the State Pension, even though no National Insurance is paid on it until £12,570. Dividends don't count towards your State Pension.
That's another reason to pay at least that much as salary. You need 35 qualifying years for the full new State Pension, and a £5,000 salary doesn't give you one.
Beyond salary and dividends
The calculator assumes you take all the profit out this year. Often you don't need to, and that opens up better options.
Employer pension contributions
Contributions the company pays into your pension come off profit before corporation tax and have no income tax or National Insurance. For many directors they beat both salary and dividends.
Leave profit in the company
Profit you don't take out has only had corporation tax taken off. You can pay it as dividends in a later year when you have unused allowances or less other income.
Use both dividend allowances
If your spouse or civil partner genuinely owns shares, dividends paid to them use their own allowances and bands. Gifts of shares must be outright, so take advice first.
Watch the £100,000 line
Between £100,000 and £125,140 of income you lose your personal allowance, which makes extra dividends very expensive. Pension contributions or leaving profit in the company help here.
Check the dividends are legal
Dividends can only be paid from profits the company has kept after tax. Paying more can make them unlawful and leave you owing the money back.
Plan before the year end
Salary, dividends and pension contributions all need deciding before the end of the tax year and your company's year end. Try the options here first.
Common salary and dividend mistakes
Ignoring the corporation tax saving
Comparing salaries on NI alone makes £5,000 look best. Salary and employer NI both reduce corporation tax, which usually makes £12,570 better.
Claiming Employment Allowance as a sole director
If you're the only director and the only employee paid over £5,000, the company can't claim it. Claiming it anyway means paying it back.
Using last year's dividend rates
Dividend tax rose by 2 percentage points in April 2026. Plans based on 8.75% now underestimate the tax.
Paying dividends without the profit
A dividend needs enough retained profit after tax to cover it. Overdrawn dividends can turn into a director's loan with its own tax charge.
Forgetting payments on account
Taking dividends often means Self Assessment, and your first bill can include half of next year's tax in advance.
Not setting payroll up for a director
Directors' National Insurance is worked out on the whole year's salary. If payroll treats you as an ordinary employee, NI is worked out month by month and can come out wrong.
Notes and assumptions
- One director. The figures are for one director-shareholder who receives all the profit. With more shareholders, use each person's share.
- All profit paid out. Profit after corporation tax is assumed to be paid as dividends in the same tax year.
- Matching years. The company's financial year is assumed to line up with the tax year.
- Not included. Pension contributions, student loan repayments, benefits in kind, Scottish income tax rates on salary and the High Income Child Benefit Charge.
- Rounding. Each tax is rounded to the penny, so totals can differ from your accounts by a few pence.
When to speak to an accountant
- Your company makes more than about £100,000 and you're weighing salary, dividends and pension contributions
- There are several shareholders, or family members own shares
- You're not sure whether the company can claim the Employment Allowance
- You have student loans, child benefit or other income that changes the picture
- You're about to set up payroll for the first time
This page explains the rules and gives an estimate. It isn't tax advice for your situation.
Frequently asked questions
Quick answers about paying yourself from a limited company.
What is the most tax-efficient salary for a director in 2026/27?
For most limited company directors it's £12,570, the personal allowance. There's no income tax or employee National Insurance on it, and although the company pays 15% employer NI above £5,000, the salary and that NI both reduce corporation tax. On £60,000 of profit, a £12,570 salary leaves you £797.48 better off than £5,000.
Is it better to take salary or dividends?
Usually a mix. A salary up to £12,570 is tax-free for you and cuts corporation tax. Above that, dividends are normally cheaper because they have no National Insurance, even though they come from profit after corporation tax. Very profitable companies can be the exception, which the calculator checks for you.
Should I pay myself £5,000 or £12,570?
£12,570 for most directors, even without the Employment Allowance. Each extra £1 of salary between the two costs the company 15p in employer NI, but saves 19% to 26.5% corporation tax on £1.15 and isn't taxed when you receive it. A £5,000 salary only wins when your personal allowance is being reduced because your income is over £100,000.
What about a salary of £6,708?
£6,708 is the Lower Earnings Limit, the lowest salary that gives you a qualifying year for the State Pension. Some guides recommend it to save employer NI, but they leave out the corporation tax saved on a higher salary. On £60,000 of profit, £6,708 leaves you £561.59 worse off than £12,570.
Can I claim the Employment Allowance as a sole director?
No. A limited company can't claim it if a single director is the only employee paid above the £5,000 secondary threshold. If another director or employee is paid above it, the company can claim up to £10,500 a year, which on a £12,570 salary wipes out the employer NI and adds £641.31 to your take-home on £60,000 of profit.
How much can I take out of my limited company tax-free?
With no other income, a £12,570 salary and £500 of dividends are free of personal tax, so £13,070 in total. The company still pays corporation tax on its profits, and employer NI on the salary above £5,000 unless it can claim the Employment Allowance.
What is a limited company tax calculator?
A limited company (or ltd company) tax calculator works out every tax between your company's profit and your own bank account: corporation tax, employer and employee National Insurance, income tax and dividend tax. This one does that for several ways of paying yourself and shows which leaves you with the most.
Do dividends have National Insurance?
No. Dividends are not earnings for National Insurance, which is the main reason directors take most of their income as dividends. They are paid from profit after corporation tax, and you pay dividend tax on them.
Does a bigger salary ever beat dividends?
Sometimes, for very profitable companies. If the company's profit is in the marginal relief band, each £1 of salary saves corporation tax at 26.5%, while dividends above £125,140 are taxed at 39.35%. On £250,000 of profit the best salary is £174,566, which beats £12,570 by £1,012.01. Pension contributions or leaving profit in the company are often better still.
Why does my salary affect my State Pension?
A salary of at least £6,708, the Lower Earnings Limit, counts as a qualifying year for the State Pension even though no National Insurance is paid until £12,570. Dividends don't count. You need 35 qualifying years for the full new State Pension.
How do directors pay National Insurance?
Directors use an annual earnings period, so National Insurance is worked out on your total salary for the tax year rather than pay period by pay period. That's why the calculator uses annual thresholds.
Does this work for Scottish taxpayers?
Partly. Corporation tax, National Insurance and dividend tax are the same across the UK, but salary above the personal allowance is taxed at Scottish rates. For the usual £12,570 salary that makes no difference.
Should I leave profit in the company instead?
Often, if you don't need the money. Profit kept in the company has only had corporation tax taken off. You can pay it out as dividends in a later year when you have unused allowances or a lower income, or use it for employer pension contributions.
Is this calculator from HMRC?
No. It's independent and uses HMRC's published rates. Its figures match published worked examples, and the corporation tax and dividend tax parts are tested against HMRC and ACCA examples on our methodology page.
Related calculators
Other free calculators for limited companies and their directors:
Software engineer with 10 years of experience, including building loan management software for a UK alternative lender.
Last updated 2 November 2026 · Rates checked against gov.uk on 3 November 2026 · LinkedIn (opens in new tab)
- Rates and thresholds for employers 2026 to 2027 – gov.uk (opens in new tab)
- Single director companies and Employment Allowance – gov.uk (opens in new tab)
- Budget 2025 rates and allowances – gov.uk (opens in new tab)
- NIM12027, directors' annual earnings period – HMRC (opens in new tab)
This calculator gives estimates for guidance only and is not tax advice. Business Tax Calc is independent and not affiliated with HMRC. See our methodology for how calculations are made and tested.