UK Salary vs Dividend Calculator 2026/27
Compare PAYE salary vs dividends for UK director-shareholders 2026/27. Stacks Corporation Tax, Employer NI, Employee NI, Income Tax and Dividend Tax.
| Director salary | £12,570 |
|---|---|
| Dividends declared | £37,430 |
| Corporation Tax | −£13,818 |
| Employer NI | −£1,136 |
| Employee NI | −£0 |
| Income Tax | −£0 |
| Dividend Tax | −£3,970 |
| Net to shareholder | £46,030 |
Worked scenarios (2026/27)
All scenarios pay a £12,570 director salary and the balance as dividends, England, no other income. Net to shareholder is after Employer NI, Employee NI, Income Tax and Dividend Tax. The combined tax rate is all taxes, including Corporation Tax on profit the calculator assumes is left in the company, divided by that profit.
- £30,000 extraction£28,180Salary £12,570 + dividends £17,430Combined tax rate 20.0%See full breakdown →
- £50,000 extraction£46,030Salary £12,570 + dividends £37,430Combined tax rate 23.2%See full breakdown →
- £100,000 extraction£78,223Salary £12,570 + dividends £87,430Combined tax rate 38.7%See full breakdown →
- £150,000 extraction£103,796Salary £12,570 + dividends £137,430Combined tax rate 46.9%See full breakdown →
- £200,000 extraction£134,121Salary £12,570 + dividends £187,430Combined tax rate 49.1%See full breakdown →
How the salary vs dividend split works
If you own a UK limited company and you also work in it as a director, you choose how to pay yourself: through a PAYE salary, through dividends on your shares, or through a combination of the two. The mix matters because every pound of profit that reaches your personal bank account passes through a stack of taxes, and the order in which those taxes apply changes how much is left.
Here is the full stack for 2026/27:
- Corporation Tax sits at the top. Profits up to £50,000 pay the 19% small profits rate and profits above £250,000 the 25% main rate. In between, marginal relief makes the effective rate on each extra £1 of profit 26.5%. The limits are reduced for short accounting periods and for associated companies (GOV.UK).
- Employer Class 1 NIC is charged at 15% on salary above the £5,000 Secondary Threshold (from 6 April 2025; it was 13.8% above £9,100 in 2024/25).
- Employee Class 1 NIC is 8% on salary between £12,570 and £50,270, and 2% above.
- Income Tax on salary follows the usual bands: £12,570 Personal Allowance, 20% to £50,270, 40% to £125,140, 45% above. The Personal Allowance tapers by £1 for every £2 of income above £100,000, reaching nil at £125,140. Scottish taxpayers pay Scottish rates on salary.
- Dividend Tax is paid on dividends from the company’s post-Corporation-Tax profit. The first £500 is taxed at 0% (the dividend allowance), but it still uses up the band it falls in. Above that the rate depends on the band the dividends fall into when stacked on top of other income: 10.75% basic, 35.75% higher, 39.35% additional. Dividend rates and bands are the same for Scottish taxpayers.
Salary and employer NI are deductible business expenses; dividends are not. That is why dividends are not always cheaper than salary, and why the best mix depends on the company’s Corporation Tax rate.
Why a £12,570 salary is the usual answer
A director salary equal to the Personal Allowance, which is also the NI Primary Threshold, gives:
- £0 Income Tax (uses the full Personal Allowance)
- £0 employee NI (sits at the Primary Threshold)
- £1,135.50 employer NI ((£12,570 - £5,000) × 15%)
- A Corporation Tax saving of (£12,570 + £1,135.50) × 19% = £2,604.05 where the company pays the small profits rate
Net cost to the company: £11,101.46, for £12,570 in the director’s hands with no personal tax, or about 88p of company money per £1 received. The salary also gives the director a qualifying year for the State Pension.
The employer NI would be covered by Employment Allowance (up to £10,500 a year), but a company cannot claim it if its only director is the only employee liable for secondary Class 1 NI (GOV.UK). A second employee or director paid above the Secondary Threshold changes that.
Above £12,570, salary gets dearer. Per £1 of pre-tax profit, extra salary in the basic-rate band (employer NI 15%, Income Tax 20%, employee NI 8%) leaves the director about 63p. The same £1 taken as a basic-rate dividend from profit taxed at 19% leaves 72p.
Worked examples for 2026/27
Each example pays a £12,570 salary and the rest as dividends, England, no other income. “Profit needed” is the pre-tax profit that exactly funds the extraction after employer NI and Corporation Tax.
£30,000 extraction
Salary £12,570, dividends £17,430, all in the basic-rate band. Dividend tax £1,820 (the first £500 at 0%, the rest at 10.75%). Net to shareholder £28,180. Profit needed £35,224, so all taxes together take 20.0% of it.
£50,000 extraction
Salary £12,570, dividends £37,430, still within the basic-rate band (it ends at £50,270). Dividend tax £3,970. Net to shareholder £46,030. Profit needed £59,915; all taxes 23.2% of it.
£100,000 extraction
Salary £12,570, dividends £87,430. The dividends now straddle the higher-rate threshold: the £500 allowance and the next slice up to £50,270 sit in the basic-rate band, and the rest is taxed at 35.75%. Dividend tax £21,777; net to shareholder £78,223. Profit needed £127,556; all taxes 38.7% of it.
£125,000 extraction
Salary £12,570, dividends £112,430. Total income is inside the £100,000 to £125,140 taper zone, so most of the Personal Allowance is lost: £2,500 of Income Tax is now due on the salary, and dividend tax is £33,840. Net to shareholder £88,660. Profit needed £161,569; all taxes 45.1% of it. Some directors keep total income at £100,000 and use employer pension contributions for the rest.
£200,000 extraction
Salary £12,570, dividends £187,430, reaching the additional-rate band, where dividends are taxed at 39.35%. Income Tax on the salary £2,514, dividend tax £63,365, net to shareholder £134,121. Profit needed £263,610; all taxes 49.1% of it.
When the answer is not £12,570 + dividends
The company has no profits to distribute. A company can only pay dividends out of profits available for the purpose (Companies Act 2006 s.830), so a loss-making company cannot pay them. Salary is still possible if the company can afford it.
You need NI credits for State Pension. Earnings of at least the Lower Earnings Limit (£6,708 in 2026/27, or £129 a week) give a qualifying year for the State Pension. Dividends alone do not.
You want to put money into a pension. Employer contributions paid by the company to a registered pension scheme are not taxed as the director’s earnings and carry no NI, and can be deductible for the company (HMRC BIM46001). They count towards the £60,000 Annual Allowance.
What we do not model
- The Director’s Loan Account. If a loan to a participator is still outstanding 9 months after the end of the accounting period, the company pays a charge under CTA 2010 s.455 at the dividend upper rate for the year the loan was made (35.75% for loans made in 2026/27), repayable once the loan is repaid (CTA 2010 s.455).
- Business Asset Disposal Relief (BADR) on a qualifying disposal or winding-up: 18% Capital Gains Tax from 6 April 2026, up to a £1,000,000 lifetime limit (GOV.UK).
- IR35 / deemed payment rules for off-payroll engagements. Use the dedicated IR35 Deemed Payment calculator.
- Pension contributions, by salary sacrifice or directly from the company.
- Payrolled benefits in kind, which attract Class 1A NI for the employer.
Related calculators and guides
- Contractor (IR35) Calculator - inside vs outside IR35 take-home with the day-rate frame.
- IR35 Deemed Payment - Chapter 8 ITEPA gross-up where the engager applies PAYE.
- Dividend Tax Calculator - standalone dividend tax stacked on other income.
- Corporation Tax Calculator - small profits rate, main rate and marginal relief.
- Pension Annual Allowance - the annual limit and high-income taper.
- Sole Trader vs Limited Company - which structure to use in the first place.
- Director’s Loan Account guide - s455 trap and how to use the DLA cleanly.
Related calculators
Other UK tax calculators that pair with the Salary vs Dividend.
Frequently asked questions
Why is £12,570 the standard director salary?
It matches the Personal Allowance, so no Income Tax is due on it, and the employee NI Primary Threshold, so no employee NI. The company pays employer NI at 15% on the part above the £5,000 Secondary Threshold: £1,135.50. Employment Allowance (up to £10,500 in 2026/27) would cover that, but a company whose only director is the only employee liable for secondary Class 1 NI cannot claim it.
Is salary or dividend more tax-efficient at higher levels?
It depends on the Corporation Tax rate the company pays. Per £1 of pre-tax profit, extra salary in the higher-rate band (15% employer NI, 40% Income Tax, 2% NI) leaves about 50p. A higher-rate dividend (35.75%) leaves 52p if the profit was taxed at 19%, but 48p at the 25% main rate. In the basic-rate band dividends win (67p against 63p even at 25%); in the additional-rate band at the main rate, salary leaves 46p and dividends 45p. Use the calculator with your own salary and profit figures.
Should I keep some profits in the company instead?
Profit you leave in the company pays Corporation Tax (19% up to £50,000, 25% above £250,000, with marginal relief between) but no personal tax until you take it out. You can take it later in a lower-income year, or the company can make employer pension contributions. On a qualifying disposal or winding-up, Business Asset Disposal Relief taxes gains at 18% from 6 April 2026, up to a £1,000,000 lifetime limit, if the conditions are met.
What happens in the £100,000 to £125,140 Personal Allowance taper zone?
Above £100,000 of adjusted net income your Personal Allowance falls by £1 for every £2, to nil at £125,140. On the salary path the marginal personal rate is 62% (40% Income Tax on 1.5 times the extra income, plus 2% NI). On the dividend path, with a £12,570 salary, our engine gives 58.25%, because the lost allowance makes the salary taxable and pushes more dividends into the higher rate. Employer pension contributions or holding dividends over to a later year can keep income below £100,000.
Does my company need to pay Employer NI on the £12,570 director salary?
Yes, on the part above the £5,000 Secondary Threshold: at 15% that is £1,135.50 in 2026/27. A company whose only director is the only employee liable for secondary Class 1 NI cannot claim Employment Allowance, so that cost usually lands. The salary and the employer NI are both deductible for Corporation Tax, at 19% where profits are within the small profits rate.
What about pension contributions from the company?
Employer contributions paid by the company to a registered pension scheme are not taxed as the director's earnings and carry no employee or employer NI. HMRC's Business Income Manual (BIM46001 onwards) sets out when they are deductible for the company. They count towards the £60,000 Annual Allowance, with unused allowance from the previous 3 tax years available to carry forward. From 6 April 2027 most unused pension funds will count towards your estate for Inheritance Tax.
How accurate is this calculator?
It models Corporation Tax (with marginal relief), employer NI, employee NI, Income Tax (including Scottish rates and the allowance taper) and dividend tax at the published rates for the selected year, with Employment Allowance if you tick it. It does not model associated companies or short accounting periods, the Director's Loan Account, IR35, Business Asset Disposal Relief, pension contributions, payrolled benefits in kind or other income. Treat the result as a planning estimate and confirm specifics with an accountant.