Dividend vs Salary Calculator UK 2026/27

Limited company directors: find the most tax-efficient way to take money from your company. Compare taking all salary, optimal salary plus dividends, or all dividends · using 2026/27 UK tax rates.

£0
Enter your details to see your potential tax saving.
Strategy Comparison · All Three Options
Item S1: All Salary S2: Optimal Split S3: All Dividends
Salary Taken £0 £0 £0
Dividends Taken £0 £0 £0
Corporation Tax £0 £0 £0
Income Tax (salary) £0 £0 £0
Employee NI £0 £0 £0
Employer NI £0 £0 £0
Dividend Tax £0 £0 £0
Total Tax Bill £0 £0 £0
Net Take-Home £0 £0 £0
Effective Rate 0% 0% 0%

S1 = All salary · S2 = £12,570 salary + rest as dividends (recommended) · S3 = £0 salary, all dividends. Effective rate is based on desired personal income.

Enter your company profit and desired income to compare all three strategies.
Tax Bill Comparison by Strategy
How the Strategies Work (2026/27)

Strategy 1 · All Salary: All desired income is paid as salary. The company pays employer NI (13.8% above £9,100) and deducts the full salary cost. You pay income tax and employee NI. Corporation tax is lower because salary reduces company profit, but your personal tax bill is higher.

Strategy 2 · Optimal Split (recommended): Salary is set at £12,570 (the personal allowance). This uses your personal allowance fully, avoids income tax on the salary, and keeps employer NI minimal. The remainder of desired income is drawn as dividends · taxed at 8.75% (basic) or 33.75% (higher) rather than 20%/40% income tax.

Strategy 3 · All Dividends: No salary is paid. Company profit is taxed by corporation tax, and you draw everything as dividends. No employer/employee NI is owed. However, the company loses the salary deduction, potentially increasing corporation tax. Also, no state pension NI credits are earned.

Note: if desired income exceeds available company profit after tax, some figures will be limited. Strategy 2 is almost always optimal when you have scope to use your personal allowance via salary.

Dividend vs Salary · Estimated Take-Home 2026/27

Optimal split strategy (£12,570 salary + rest as dividends) vs all salary. Assumes single director, no other income, England/Wales rates.

Company Profit All Salary Take-Home Optimal Split Take-Home Annual Saving (Split vs Salary)
£30,000~£22,800~£24,900+£2,100
£50,000~£35,400~£39,200+£3,800
£80,000~£52,600~£58,400+£5,800
£100,000~£63,200~£70,900+£7,700
£150,000~£87,100~£97,600+£10,500
£200,000~£108,300~£122,100+£13,800

Approximate figures only. Use the calculator above for your exact numbers.

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Dividend vs Salary Calculator FAQs

What is the optimal salary for a limited company director in 2026/27?
The optimal salary for most director-shareholders is £12,570 per year · equal to the personal allowance. At this level, no income tax is due on the salary. Employer NI becomes payable (13.8% above £9,100), but the salary is deductible against corporation tax, often making the net cost neutral or slightly beneficial. Some directors pay only £9,100 to avoid all NI if they have no other income source for state pension credits.
Is it better to take salary or dividends from a limited company?
The most tax-efficient approach for most directors is a combination: a salary up to £12,570 (using the personal allowance with minimal NI) and the remainder as dividends. Dividends are taxed at 8.75% (basic rate) compared to 20% income tax plus NI on salary. This "optimal split" typically saves £3,000–£15,000 per year compared to taking all salary, depending on profit levels.
Why not take everything as dividends?
Taking £0 salary means losing the corporation tax deduction for a salary expense, and forfeiting a year's NI credit toward your State Pension. You also do not build NI contribution history for benefits entitlement. A small salary at £12,570 is essentially free once the corporation tax saving and personal allowance are factored in, making the all-dividends strategy usually inferior to the optimal split.
How is corporation tax calculated on profits?
In 2026/27, corporation tax is 19% on annual profits up to £50,000 (small profits rate) and 25% on profits above £250,000 (main rate). Profits between these limits receive marginal relief, giving an effective rate that tapers from 19% to 25%. Paying a director salary reduces the company's taxable profit, which in turn reduces the corporation tax bill.
Do dividends count as income for mortgage purposes?
Most mortgage lenders will accept director dividends as income, but typically require 2–3 years of accounts and Self Assessment tax returns to evidence them. Some lenders average the last two years of salary plus dividends. Taking a higher salary can improve affordability assessments, even if it is slightly less tax-efficient. Always check with a mortgage broker if affordability is a concern.
What is the dividend allowance for 2026/27?
The dividend allowance is £500 in 2026/27. This means the first £500 of dividend income each year is tax-free regardless of your other income or tax band. Above £500, dividends are taxed at 8.75% (basic rate), 33.75% (higher rate), or 39.35% (additional rate). The allowance has been reduced significantly in recent years from £2,000 in 2022/23.
How do Scottish income tax rates affect the calculation?
Scottish taxpayers pay different income tax rates on salary, with a starter rate of 19%, basic rate of 20%, intermediate rate of 21%, higher rate of 42%, and top rate of 48%. However, dividends are always taxed at UK rates (not Scottish rates) regardless of where you live. This means Scottish directors often benefit even more from dividends versus salary, as the Scottish higher rate on salary is 42% compared to 33.75% on dividends.

For informational purposes only · Not financial advice · Tax rates shown are for 2026/27 · Always consult a qualified accountant or tax adviser for personal guidance