Home / Calculators / Dividend vs Salary Calculator 2026/27
Side-by-side cost of paying yourself by dividend vs salary.
For a director who controls how the company pays them, salary and dividends are taxed completely differently.
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More about this calculator
Salary is deductible against Corporation Tax (saves the company 19–25%) but creates personal income tax + employee NI + employer NI (15%). Dividends are paid from post-Corporation-Tax profit but at lower personal rates (10.75% basic, 35.75% higher, 39.35% additional).
A small salary plus dividends is a commonly modelled mix, rather than all salary or all dividends. This calculator takes the company’s profit and the salary you enter, treats the profit left after the salary, employer NI and Corporation Tax as dividends, and shows take-home pay, Corporation Tax, employer NI and the total tax, with a comparison against a lower benchmark salary.
Estimated personal take-home from the company
£0
After company-level and personal-level taxes.
Net dividends available £0 Corporation tax £0 Employer NI on salary £0 Total taxes and NI across company and director £0 Income-contingent student loan £0
What this means
This salary level is behaving like a fairly normal owner-manager mix, where the big question is whether the payroll layer is buying you enough benefit to justify the extra NI friction.
Why is salary not compared with dividends directly?
Salary and dividends are taxed in different places. Salary can trigger employer NI and employee NI but usually saves corporation tax. Dividends come out after corporation tax and then face dividend tax personally. The only sensible comparison is the full stack.
What is the benchmark used in the narrative?
The comparison story checks your chosen salary against a simple low-salary benchmark. If no Employment Allowance is being used, the benchmark is the employer NI threshold. If allowance is available, the benchmark moves up to the personal allowance . It is a planning reference point, not personalised advice.
Why can the company and personal answers both change?
Changing salary affects the company profit left for corporation tax, the dividend pool left after corporation tax, and the director's own PAYE and dividend band position. That is why the best-looking answer is rarely obvious from one rate in isolation.
Worked examples
See it on real numbers
Three director-shareholder scenarios using 2026/27 rates and the calculator's model: one director, England, Wales and Northern Ireland bands, all post-tax profit paid out as dividends, no pension and no Employment Allowance.
CASE 1
Lisa — solo IT consultant, £60,000 of company profit
Sole director and only employee of her limited company, with £60,000 of profit before paying herself.
Inputs
Company profit before salary: £60,000
Salary: £12,570
Employment Allowance: not applied
Result
Employer NI on the salary is £1,136 (15% above £5,000). Taxable profit of £46,295 bears Corporation Tax of £8,796 at 19%, leaving £37,499 to pay out as dividends. The salary uses her Personal Allowance, so dividend tax is £3,977 (10.75% on £36,999 after the £500 dividend allowance ). Take-home £46,091, about 77% of the £60,000; total tax and NI £13,909.
Takeaway. All of Lisa's dividends fall within the basic rate band. A company cannot claim Employment Allowance if its only director is also its only employee paying employer NI, which is why employer NI applies to her salary. Changing the salary input shows how the total moves between employer NI, Corporation Tax and dividend tax.
CASE 2
Mark — agency owner, £150,000 of profit and a £40,000 pension contribution
Owns a small agency. The company pays a £40,000 employer pension contribution for him out of £150,000 of profit.
Inputs
Company profit before salary: £110,000 (£150,000 less the £40,000 pension contribution, which the calculator does not model)
Salary: £12,570
Employment Allowance: not applied
Result
Employer NI £1,136. Taxable profit £96,295 bears Corporation Tax of £21,768 (25% less marginal relief). Dividends of £74,526 carry dividend tax of £17,164: £3,999 at 10.75% within the basic rate band after the £500 allowance, and £13,165 at 35.75% above it. Take-home £69,932, with £40,000 in his pension.
Takeaway. HMRC treats an employer pension contribution as an allowable expense for the company when it is part of a remuneration package paid wholly and exclusively for the business. The contribution counts towards Mark's annual allowance (£60,000 for most people). Paid out as dividends instead, the £40,000 would have borne Corporation Tax and then dividend tax at 35.75%, and his income of about £116,500 would have withdrawn £8,248 of his Personal Allowance: take-home about £85,110, against £69,932 plus the £40,000 in his pension.
CASE 3
James — sole owner, £250,000 of company profit
Sole director-shareholder of a profitable software company with £250,000 of profit before his salary.
Inputs
Company profit before salary: £250,000
Salary: £12,570
Employment Allowance: not applied
Result
Employer NI £1,136; taxable profit £236,295; Corporation Tax £58,868. Paying out all £177,426 as dividends takes his total income to about £190,000, so his Personal Allowance is withdrawn in full: Income Tax on the salary is £2,514 and dividend tax is £59,429 across the 10.75%, 35.75% and 39.35% rates. Take-home £128,054; total tax and NI £121,946.
Takeaway. Once total income passes £125,140 the Personal Allowance is gone, and dividends above the higher rate band are taxed at 39.35%. The calculator assumes all post-tax profit is paid out in the year. Profit left in the company has already borne Corporation Tax and is taxed on James personally only when it is paid out, at the rates in force then.
Illustrative examples for education only, not personal advice. Figures are rounded and use 2026/27 rates.
What's next
Use the company to pay employer pension contributions instead
Employer pension contributions are a Corporation Tax deduction for the company and entirely outside dividend tax for the director — often a more efficient route than extracting more dividend. The Annual Allowance calculator shows how much can go into the pension this year (and via carry-forward from past years).
Check pension Annual Allowance →
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How we calculate this — Director: salary and dividend mix (Ltd company)
Method — 2026/27 tax year
Approach: for a small Ltd company with one director-shareholder we compute total leakage = corporation tax on profits used for dividends + dividend tax on extraction + income tax on salary + employee and employer NI on salary above the thresholds.
2026/27 key rates used: Corporation tax 19% on profits to £50k, 26.5% marginal on £50k–£250k, 25% above. Dividend allowance £500. Employment allowance £10,500 (where eligible). Director secondary NI threshold £5,000.
The common split: salary up to the secondary threshold (£5,000) has no employer NI, but it is below the 2026/27 Lower Earnings Limit (£6,708), so it does not keep a State Pension qualifying year. Salary from £6,708 up to the primary threshold (£12,570) is treated as if NI had been paid, so the year counts, with no employee NI; employer NI at 15% applies to the part above £5,000, and Employment Allowance cannot cover it where the sole director is the company’s only employee liable for employer NI. Above that, dividends usually carry less tax than salary because no NI is due on them.
What we don't model: pension contributions via the company (very efficient: 0% personal tax, 0% NI, deductible against CT), IR35 / off-payroll status, or salary-sacrifice schemes.
Data sources
Reviewed against 2026/27 thresholds. We update when HMRC publishes rate changes — tracked in the changelog . Found an error? See corrections policy .
About this calculator
Last reviewed: September 2026. Reviewed by the Editor against current official guidance for 2026/27.
Verified against: gov.uk — Tax on dividends (checked on the last review date above).
Source: calculator JavaScript is unminified at /assets/ — see Open methodology for how to verify the math. Updates tracked in the changelog .
Spotted an error? Report it . Confirmed errors are corrected under the corrections policy .
Disclaimer: This tool gives a guideline estimate using current published UK rates and thresholds. It is general information, not personal financial, tax, or legal advice. Verify the figures against your own circumstances, the latest gov.uk guidance, and a qualified adviser before acting. UK Tax Drag accepts no liability for decisions made on the basis of these calculations.
Dividend vs Salary — UK director-shareholder comparison
How to extract money from a UK limited company. Most director-shareholders take a low salary plus dividends — but the optimal split changes with each Budget.
Dimension
Salary Dividends
Income tax rates 2026/27 0% / 20% / 40% / 45% (after PA) 0% / 10.75% / 35.75% / 39.35% (after £500 allowance) NI Employee NI 8% + Employer NI 15% No NI on dividends Tax-free allowance Personal Allowance £12,570 £500 dividend allowance Corporation Tax deductibility Yes — reduces company profit No — paid from post-tax profit Effective rate (basic-rate) About 37% of each £1 of pre-tax profit paid out (15% employer NI, then 20% Income Tax + 8% employee NI; salary is deductible for Corporation Tax) About 28% with 19% Corporation Tax, 33% with 25% (Corporation Tax, then 10.75% dividend tax) Effective rate (higher-rate) About 50% (15% employer NI, then 40% Income Tax + 2% employee NI) About 48% with 19% Corporation Tax, 52% with 25% (then 35.75% dividend tax) Pension contributions Salary base for "earnings" definition — needed for high pension contributions Don't count as earnings Maternity/paternity pay Salary-based — gives access to SMP/SPP No statutory pay rights Mortgage applications Salary clearly evidenced via payslips Need 2-3 years of dividend history Loss protection (job loss) Salary creates an "employment" track record Dividends are profit distribution, not employment Sweet spot Salary = NI primary threshold (£12,570 — preserves State Pension) Dividends up to basic-rate band edge (£50,270 total income)
Figures use 2026/27 UK tax-year rates and thresholds. Verify your specific situation against HMRC, FCA or MoneyHelper guidance before deciding.
Pages are checked against the primary sources listed on each page and reviewed by the Editor; corrections are logged in the changelog . Pages are drafted with the help of AI tools (how AI is used ). No affiliate revenue. No sponsored content. No paid placements.
UK Tax Drag is an independent publication by Finsolve Consulting Limited, not affiliated with or endorsed by HMRC, GOV.UK or any government body.