Salary vs Dividends Calculator 2026/27
Find the optimal salary and dividend split for your limited company and see how much you could save.
Why Salary + Dividends Is Tax Efficient
As a limited company director, you can choose how to extract money from your company. The most tax-efficient approach for most directors is to take a low salary — just enough to use your personal allowance — and extract the rest as dividends.
Dividends are paid from after-tax profits (your company pays corporation tax first), but the dividend tax rates (10.75%, 35.75%, 39.35%) are lower than income tax rates on salary. Additionally, dividends are not subject to National Insurance, which creates significant savings.
2026/27 Key Rates for Ltd Company Directors
| Rate/Threshold | Amount |
|---|---|
| Personal Allowance | £12,570 |
| Dividend Allowance | £500 |
| Dividend Basic Rate | 10.75% |
| Dividend Higher Rate | 35.75% |
| Corporation Tax (small profits) | 19% |
| Corporation Tax (main rate) | 25% |
Frequently Asked Questions
What is the optimal salary for a limited company director?
For most directors in 2026/27, the optimal salary is £12,570 — equal to the personal allowance and employee NI primary threshold. This means you pay no income tax and no employee NI on your salary, while still making use of your full personal allowance before taking dividends.
How are dividends taxed in 2026/27?
The first £500 of dividend income is tax-free (the dividend allowance). Above that, dividends are taxed at 8.75% if they fall in the basic rate band, 33.75% in the higher rate band, and 39.35% in the additional rate band. These rates are lower than equivalent salary tax rates, which is why the salary + dividends split is often more tax efficient.
What is corporation tax in 2026/27?
The small profits rate is 19% for profits up to £50,000. The main rate is 25% for profits over £250,000. Profits in between attract marginal relief, resulting in a gradually increasing effective rate.
Should I include employer National Insurance in the calculation?
Yes — employer NI is a real cost to your company. When you pay yourself a salary above £5,000, your company must also pay 15% employer NI on the excess. This reduces the profit available for dividends. The calculator includes this by default.
What if I have other income outside the company?
Other income (e.g. from employment, rental income, or a partner's salary) uses up part of your basic rate band and personal allowance. This means more of your dividends may be taxed at the higher rate. Enter your other income in the calculator to get an accurate picture.