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.

Last updated: August 2026

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.

Reviewed by

, LLM (UK), CFP®, CIM®, PFP®. Financial planner with 18 years in banking and wealth management, holding a UK master of laws and the Canadian CFP®, CIM® and PFP® designations. Writes and reviews every calculator and article on FinanceToolz.

Last updated: August 2026. How figures are sourced, reviewed and corrected is set out in our editorial policy. This is general information, not regulated financial advice.

Sources

Every rate and threshold used by this calculator is taken from the official pages below. If a figure here disagrees with one of these, the official page is right, please tell us.