Dividend vs Salary Calculator 2026/27

For a sole director-shareholder: compare extracting company profit as all salary, all dividend, or the standard salary+dividend mix.

Company profit

£

Company's annual profit before corporation tax, employer NI and any director's remuneration.

Assumptions:

  • • Sole director-shareholder (no Employment Allowance)
  • • Standard 1257L tax code, no other income
  • • rUK income tax (not Scottish)
  • • £500 dividend allowance, full £12,570 PA

All Salary

Net take-home

£41,197

31.3% total tax burden

Company profit£60,000
– Employer NI (15% above £5k)-£7,174
– Corporation Tax£0
Salary paid£52,826
– Income tax-£8,562
– Employee NI-£3,067

All Dividend

Net take-home

£44,111

26.5% total tax burden

Company profit£60,000
– Corporation Tax-£12,150
Dividend distributed£47,850
– Dividend tax-£3,739

Salary £12,570 + Dividends (typical optimum)

Net take-home

£46,091

23.2% total tax burden

Salary £12,570 (uses Personal Allowance)£12,570
– Employer NI on salary above £5k-£1,136
Remaining profit£46,295
– Corporation Tax-£8,796
Dividend distributed£37,499
– Dividend tax-£3,977
– Employee NI on salary£0

Why the mix usually wins

The standard owner-managed limited company strategy is:

  1. Take a salary equal to your Personal Allowance (£12,570 in 2026/27). This uses your tax-free band and qualifies you for a State Pension year.
  2. Take the rest as dividends. Dividends don't attract National Insurance, only the lower dividend tax rates (10.75% / 35.75% / 39.35% for 2026/27).

The £12,570 salary now sits exactly at the NI primary threshold, so the employee owes no NI on it — but the slice above £5,000 still attracts employer NI at 15%. For a sole director that's about £1,135/year of employer NI, but it remains optimal because the dividend tax savings outweigh it.

If you take £0 salary and 100% dividend, you waste your full £12,570 Personal Allowance, which would otherwise shield £12,570 of dividend from any tax. Even though the £500 dividend allowance applies regardless, the extra £12,070 of dividends taxed at 10.75% instead of 0% costs you over £1,000/year.

You also miss the State Pension qualifying year that a £12,570 salary buys you for free.

Related calculators

Other free UK tools that follow on from this calculation.

IR35 Calculator

PSC contractor take-home: outside IR35 (salary + dividends) vs inside IR35 (deemed PAYE).

Ltd Co vs Sole Trader

Same profit, two structures — which gives more take-home after tax, NI and CT?

Dividend Tax Calculator

Dividend tax with the 2026/27 10.75% / 35.75% / 39.35% rates above the £500 allowance.

Self-Assessment Calculator

Self-employment tax including Class 4 NI at 6% and the payment-on-account schedule.