Salary vs Dividend Calculator
Most calculators make you supply the split and then tell you the tax. This one works out the split for you. Enter the profit available and it tests every salary level, then shows which one leaves you with the most.
Searched for as a salary and dividend tax calculator, this finds the split rather than asking you to guess it. If you have not decided on a company at all yet, start with sole trader vs limited company.
Salary and dividend calculator, or dividends vs salary #
People search for this as a salary and dividend calculator, a dividend and salary tax calculator, or simply dividends vs salary. It is one question with several names: for a given company profit, how should a director split their income to keep the most?
The answer is not a rule of thumb. It moves with your profit level, and it moves again depending on whether the company can claim the Employment Allowance.
The rates this uses #
| Charge | 2026/27 |
|---|---|
| Corporation Tax, small profits | 19% up to £50,000 |
| Corporation Tax, main rate | 25% above £250,000 |
| Corporation Tax, marginal relief | 26.5% on each pound between the two |
| Employer National Insurance | 15% above £5,000 |
| Employment Allowance | £10,500, not available to a sole director |
| Employee National Insurance | 8% from £12,570 to £50,270, then 2% |
| Dividend tax | 10.75%, 35.75%, then 39.35% |
| Dividend allowance | £500 at 0% |
The most tax efficient salary UK directors can take #
Asked as "dividend or salary", or as a director salary calculator, the question is always the same one: for the profit I have, what split leaves me with the most? The most tax efficient salary UK company directors can take is not a fixed figure. It moves with your profit level and with whether the company can claim the Employment Allowance, which is why this page tests every level rather than quoting a number.
Why a salary at all #
Two reasons, and only one is about tax.
- Salary reduces Corporation Tax. It is a deductible expense, so every pound of salary takes a pound off company profit. Dividends are paid out of profit that has already been taxed, so they reduce nothing.
- Salary builds your State Pension record. Dividends do not count. A salary at or above the Lower Earnings Limit protects a qualifying year.
The counterweight is National Insurance. Salary attracts both employer and employee contributions. Dividends attract none. That tension is the entire reason this calculation exists.
Two things that move the answer #
The Employment Allowance
It covers up to £10,500 of employer National Insurance, and it changes the shape of the answer completely. With it, employer NI on a salary is free until the charge reaches £10,500, which happens at a salary of £75,000. Without it, every pound of salary above £5,000 costs the company an extra 15p.
A sole director with no other employee on the payroll cannot claim it. That is why the toggle above matters more than anything else on this page.
Corporation Tax marginal relief
Between £50,000 and £250,000 of profit, each additional pound is taxed at 26.5%, which is higher than the 25% main rate itself. Dividends come out of profit that has borne that charge, which quietly makes them more expensive than they look at higher profit levels.
When the low-salary rule breaks #
The usual advice is a salary around the Personal Allowance with everything else as dividends. For most small companies that is right, and this calculator will confirm it.
But it stops being right at higher profits. Once Corporation Tax is biting at 26.5% and dividends are landing in the 39.35% additional rate band, the combined cost of a dividend can exceed the combined cost of salary, even with both National Insurance charges. The calculator tests every level rather than assuming the rule of thumb holds.
What this does not account for #
- Scottish taxpayers. Different Income Tax bands on salary. Dividend and Corporation Tax rates are UK-wide.
- Pension contributions, which are usually more efficient than either salary or dividends
- Student loan repayments
- Associated companies, which reduce the Corporation Tax thresholds
- The High Income Child Benefit Charge
- Whether the company actually has the cash and distributable reserves to pay the dividend
That last one is not a technicality. Dividends can only be paid from accumulated realised profits. A company with profit on paper but no reserves cannot legally declare one.
Common questions #
What is the most tax-efficient salary and dividend split?
For most small company directors it is a salary around the £12,570 Personal Allowance with the rest taken as dividends. That changes if the company can claim the Employment Allowance, or once profits are high enough that Corporation Tax marginal relief applies.
Why take a salary at all instead of only dividends?
A salary is a deductible expense for the company, so it reduces Corporation Tax, and it counts towards your State Pension record. Dividends do neither. Dividends are paid out of profit that has already been taxed.
Does the Employment Allowance change the answer?
Substantially. It covers up to £10,500 of employer National Insurance, which makes a much higher salary worth taking. A sole director with no other employee on the payroll cannot claim it.
Is a low salary always best?
No. Once profits are high enough for Corporation Tax marginal relief at 26.5%, and dividends are landing in the 39.35% additional rate band, additional salary can beat additional dividends. The calculator tests every level rather than assuming.
Already know your split? The dividend tax calculator works out the tax on a figure you supply.