Salary vs Dividends Calculator 2026/27
Find the optimal salary and dividend split for your limited company and see how much you could save.
Updated for the 2026/27 tax year · Last reviewed April 2026
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.
This approach is most relevant when you are operating outside IR35 through your own limited company. If you are a sole trader rather than a director, see our self-employed tax calculator instead.
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% |
Example: £80,000 Company Profit
To illustrate the difference, here's what happens with £80,000 of company profit under three extraction strategies in 2026/27:
All Salary: Taking the full £80,000 as salary means paying income tax at 20% and 40% rates, plus employee NI at 8% and 2%. Your employer (the company) also pays 15% employer NI on earnings above £5,000. After all deductions, you'd take home roughly £52,000–£54,000, and the company has no corporation tax to pay since all profit was paid out as salary.
Optimal Split: Taking a salary of £12,570 (the personal allowance) and the rest as dividends is typically the most tax-efficient approach. The company pays corporation tax on the remaining profit, then you receive dividends taxed at 8.75% (basic rate) and 33.75% (higher rate). This usually results in take-home pay of £58,000–£61,000, significantly more than all-salary.
Minimum Salary: Some directors take a salary at just £5,000 (the employer NI threshold) to avoid employer NI entirely. This saves a small amount of NI but means missing out on the income tax personal allowance, so it's typically slightly less efficient than the £12,570 approach. Use our calculator above to see the exact figures for your profit level.