Simple Salary / Dividend vs salary calculator
Dividend vs salary calculator
If you run your own limited company, how much should you pay yourself as salary and how much as dividends? Compare the usual options and see what reaches you after corporation tax, income tax, National Insurance and dividend tax.
What is the most tax-efficient salary for a company director in 2026/27?
For a sole director with no other income, a salary equal to the Personal Allowance (£12,570) with the rest as dividends is usually best. It attracts a little employer National Insurance (on the part above £5,000) but no income tax or employee NI, it is deductible for corporation tax, and it earns a State Pension qualifying year. A salary of £5,000 avoids employer NI entirely but wastes some allowance.
How are dividends taxed?
The first £500 of dividends is tax-free. Above that, dividends are taxed at 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% above £125,140. Dividends do not attract National Insurance, but they are paid from profit that has already suffered corporation tax.
What is the corporation tax rate?
19% on profits up to £50,000, 25% on profits over £250,000, with marginal relief in between so the rate rises gradually. The limits are shared between associated companies.
Can I pay dividends if the company has no profit?
No. Dividends can only be paid from profits after corporation tax, including retained profits from earlier years. Paying dividends the company cannot afford makes them illegal dividends, which HMRC can treat as loans or salary.
Should I pay into a pension through the company instead?
Employer pension contributions are deductible for corporation tax and attract no NI or income tax when paid, which makes them the most tax-efficient way to extract profit you do not need to spend now. The trade-off is that the money is locked until at least age 57.
Rates last checked against gov.uk on 13 October 2026.
Sources
Please note
Estimates for a simple case: one director, no other income or employees, all profit drawn. Your position may differ, for example with a spouse as shareholder, other income, or profits left in the company. This is not advice; an accountant can look at your actual numbers.