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Salary vs dividends calculator.
Most limited company directors pay themselves through a combination of salary and dividends. The split you choose affects how much income tax, National Insurance and corporation tax you pay. Tell us what you want to take out, and this finds the most tax-efficient way to take it — and shows what you actually take home.
Before any salary or dividends are paid to you, and before corporation tax.
The total you want to take out this year — salary and dividends together.
Employment, rental or pension income you already receive. It uses up your personal allowance and tax bands before this package does — which is why the best salary is not always £12,570.
2026/27 rates. Everything is calculated in your browser; nothing you type is sent anywhere or stored.
Salary and dividends are tried at every level to find the mix that leaves you the most after your own tax. The company's corporation tax and employer National Insurance are shown in full below. Assumes a single company with no associated companies, no pension contributions and no Employment Allowance — a sole director cannot claim it.
This is a guide, not advice. Your own position depends on details a calculator cannot know — book a free call and we will work through it properly.
The most tax-efficient way to take £50,000
Where the tax goes
Want to talk through your numbers?
Every situation is different. Send your numbers across and Björgvin will review them before your free 20-minute call — so you get answers, in plain English, with clear next steps to help you keep more of what you earn.
What this shows
Understanding your results
The calculator breaks your tax position into every component — so you can see the full cost of each pound you take out of your company, not just your personal tax bill.
Income tax
Personal tax on your salary above the £12,570 personal allowance. Charged at 20% basic rate, 40% higher rate and 45% additional rate depending on your total income.
Dividend tax
Tax on dividends above the £500 dividend allowance. For 2026/27 the rates are 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band. Dividends are stacked on top of your salary to determine which rate applies.
Corporation tax
Tax paid by the company on its profits before dividends are declared. The effective rate depends on profit level — 19% up to £50,000, 25% above £250,000, with marginal relief applied between those thresholds.
National Insurance
Employee NI on your salary at 8% between £12,570 and £50,270, dropping to 2% above £50,270. Employer NI is paid by the company at 15% on salary above £5,000 — this reduces the profit available for dividends, so it is shown separately in the breakdown.
Your position is unique
The calculator gives you a starting point — not a final answer
Your optimal salary and dividend split depends on more than just profit. Your other income, pension contributions, mortgage plans, future investment, property portfolio and long-term goals all affect the right answer. A qualified accountant looks at the full picture and gives you a recommendation built around your situation — not a generic rule of thumb.
Common questions
Salary vs dividends — your questions answered
Everything you need to know before making a decision.
Not covered here? Ask us directly — we answer within 1–2 working days.
What is the most tax-efficient salary for a limited company director in 2026/27?
For most directors, the optimal salary is £12,570 — the personal allowance threshold. At this level you pay no income tax and no employee NI, while the company pays employer NI only on amounts above £5,000. If you have other income sources the optimal figure may differ. The free discovery call will confirm the right number for your situation.
Should I take dividends or salary?
For most limited company directors, a combination works best — a low salary up to the personal allowance, with the remainder taken as dividends. Dividends are not subject to National Insurance and are taxed at lower rates than salary. However the right split depends on your profit level, other income and long-term plans. This calculator shows the numbers — a qualified accountant gives you the recommendation.
How does corporation tax affect my dividend?
Dividends can only be paid from post-tax profits. So before you can take a dividend, the company pays corporation tax on its profits first. This calculator shows the corporation tax alongside your personal taxes, so you can see the true total tax cost of your pay package, not just the personal tax.
What is marginal relief and does it affect me?
Marginal relief applies if your company profit falls between £50,000 and £250,000. Rather than jumping straight to 25% corporation tax, the effective rate increases gradually from 19% to 25% across that band. This calculator applies the exact HMRC marginal relief formula, so the corporation tax figure shown is as accurate as possible for your profit level.
Can I take dividends if my company isn't making a profit?
No — dividends must be paid from retained profits after tax. If your company has no available post-tax profits, any payment made as a dividend would be treated as an unlawful dividend by HMRC, which creates significant tax and legal problems. The calculator shows a warning if your package is more than the company can pay.
Does my salary affect how much dividend tax I pay?
Yes — your salary and other income determine which tax band your dividends fall into. If your salary uses up part of your basic rate band, more of your dividends will be taxed at the higher dividend rate of 35.75%. The calculator stacks income in the correct order so the dividend tax figure reflects your actual position.
Get started
Numbers are a start. A conversation is better.
Book a free 20-minute call with Björgvin. We will go through your actual position — the bits a calculator cannot know — and agree a fixed fee on the call.
- Free 20-minute call
- Fee agreed on the call
- No minimum contract
- CIMA & AAT qualified
