Salary vs dividends calculator
Updated
A director can be paid by salary, which carries income tax and National Insurance for both employee and company, or by dividends, paid from profit after corporation tax and taxed at lower dividend rates. Enter the company's profit and a salary to compare take-home pay with taking it all as salary.
Not financial advice. General information using HMRC rates for the current tax year (2026-27); your position may differ.
Profit for the year before paying yourself, after every other business cost.
The rest of the profit is paid as dividends after corporation tax. £12,570 is the point where employee National Insurance starts.
A company whose only employee paid above the secondary threshold is a director cannot claim it.
Positive means the split leaves you more.
Less than the profit, because the company also pays employer National Insurance on it.
Not financial advice. General information using HMRC rates for the 2026-27 tax year; your position may differ. Reviewed 30 October 2026.
Where the profit goes: your split
- Your take-home£46,09177%
- Corporation tax£8,79615%
- Employer NI£1,1362%
- Your tax and NI£3,9777%
Where the profit goes: all salary
- Your take-home£41,19769%
- Tax and NI£18,80331%
Worked example
A company with £60,000 of profit pays its director a salary of £12,570. Employer National Insurance is £1,136, corporation tax on what is left is £8,796, and £37,499 is paid as dividends. After income tax and National Insurance of £3,977, the director takes home £46,091, against £41,197 if the whole profit were paid as salary.
How it works
- Salary is a business cost: it reduces the company's profit, but the company pays employer National Insurance of 15% above £5,000, and you pay income tax and employee National Insurance on it.
- What is left after salary and employer National Insurance pays corporation tax, and the rest is paid to you as dividends.
- Dividends use any personal allowance the salary has not, then £500 at 0%, then 10.75%, 35.75% and 39.35% by band. There is no National Insurance on dividends.
- The all-salary line pays the largest salary the profit can cover once employer National Insurance is added, so both routes spend the same profit.
Why a small salary is common
A salary up to £12,570 carries no employee National Insurance and is covered by the personal allowance, so it is free of income tax too, and it reduces the company's corporation tax. Above £5,000 the company pays employer National Insurance of 15%, but that is also deductible for corporation tax, so the net cost is smaller than it looks. A salary at or above the lower earnings limit also keeps your National Insurance record, which counts towards the State Pension. Try a few salaries above: the right level depends on the profit and on whether the company can claim the Employment Allowance.
The Employment Allowance
The Employment Allowance takes up to £10,500 off a company's employer National Insurance bill. It is not available where the only employee paid above the secondary threshold is a director, which is the usual one-person company. If the company has other paid staff it can usually claim, and that makes a higher salary cheaper.
Dividends need profits
A company can only pay dividends out of profits available for distribution, after corporation tax, and they must be declared properly with paperwork. Salary can be paid when there is no profit; dividends cannot. This page assumes all the profit for the year is paid out, which is often not what happens: money left in the company is taxed only when it is drawn.
What this does not cover
Pension contributions from the company, which are often the most tax-efficient route of all; student loan repayments; other income you have, which changes the band your dividends fall in; Scottish income tax rates; and IR35, which can treat a contractor's income as salary whatever it is called.
Rates used (2026-27)
| Item | Rate or threshold |
|---|---|
| Personal allowance | £12,570 |
| Employee NI | 8% from £12,570, 2% above £50,270 |
| Employer NI | 15% above £5,000 |
| Dividend allowance | £500 at 0% |
| Dividend rates | 10.75% basic, 35.75% higher, 39.35% additional |
| Corporation tax | 19% to 25%, with marginal relief between £50,000 and £250,000 |
Sources: Finance Act 2026 (Royal Assent 18 March 2026): dividend ordinary and upper rates up 2 points from 6 April 2026; Finance Act 2021 s6, s7 and Sch 1 (CTA 2010 ss18A to 18N): small profits rate 19%, main rate 25%, marginal relief between 50,000 and 250,000 at a standard fraction of 3/200. England, Wales and Northern Ireland income tax bands.
Want this worked out on your real numbers?
This page works on the figures you type. CoreFi can track your income, spending and tax position from the accounts you connect, on the same HMRC rates. It does not give tax advice.
Track your own numbersFrequently asked questions
What is the most tax-efficient salary for a director?
It depends on the profit and whether the company can claim the Employment Allowance. For a one-director company a salary around the National Insurance thresholds (£5,000 to £12,570) is common, with the rest as dividends. Enter your own figures above to compare.
Do I pay National Insurance on dividends?
No. Dividends carry income tax at the dividend rates, but no employee or employer National Insurance.
Why is the all-salary figure below the profit?
Because the company pays employer National Insurance on top of the salary. The largest salary it can pay is the one where salary plus employer National Insurance equals the profit.
Does this use Scottish tax rates?
No. It uses the income tax bands for England, Wales and Northern Ireland. Dividend rates are the same across the UK, but a Scottish taxpayer's salary is taxed on different bands.
Is this financial advice?
No. It is general information using HMRC rates for the current tax year, and your position may differ. For advice on paying yourself, speak to an accountant.
More tax calculators
Not financial advice. This calculator gives general information using HMRC rates and thresholds for the 2026-27 tax year. It is not tax, legal or financial advice and does not take account of your circumstances; for advice, speak to a qualified accountant or tax adviser. CoreFi is a trading name of JG Core Ltd (company 16218779). Figures reviewed 30 October 2026.