Dividend vs salary calculator
The April 2026 dividend-rate rise changed this maths — most calculators haven't noticed. This one models employer NI, corporation tax with marginal relief, and the new 10.75%/35.75% dividend rates, and shows every line of the working.
Pre-tax profit available after all other costs, before your salary
Your split — net in your pocket
£55,764.87
Total tax & NI (company + personal): £24,235.13 — an effective 30.29% of the £80,000.00 extracted
Your split
£55,764.87
30.29% total tax
All dividends (£0 salary)
£54,160.90
32.3% total tax
All salary
£51,283.49
35.9% total tax
2026-27 rates (England, Wales & NI bands), verified against GOV.UK on 5 July 2026 — including the new 10.75%/35.75% dividend rates. Assumes no other personal income, no student loan, no pension contributions, no associated companies, and sufficient distributable reserves. Guidance, not tax advice — check the numbers with your accountant before acting.
The order of operations
1 · The company pays
Salary + employer NI (15% above £5,000) come out first and reduce taxable profit. What remains pays corporation tax — 19%, 25%, or the 26.5% marginal band in between.
2 · Dividends follow
Whatever is left after corporation tax can be distributed. That sequencing is why dividends aren’t automatically cheaper — they’ve already been taxed once inside the company.
3 · You pay
Salary uses your personal allowance and bands first; dividends stack on top — £500 at 0%, then 10.75% / 35.75% / 39.35%. Above £100,000 the personal allowance tapers away.
Worked reference (you can check it by hand): £80,000 profit, £12,570 salary, no Employment Allowance → employer NI £1,135.50, corporation tax £13,818.04, dividends £52,476.46, dividend tax £9,281.58 — £55,764.87 in your pocket, a 30.29% effective rate. All 2026-27 figures on our tax rates page.
Split questions, answered plainly
Why does the dividend-vs-salary split need rechecking for 2026-27?
Because Budget 2025 raised the basic and higher dividend rates by 2 percentage points from 6 April 2026 — to 10.75% and 35.75%. A split optimised under the old 8.75%/33.75% rates (and most calculators still using them) now overstates the dividend advantage. The corporation-tax side is unchanged: 19% up to £50,000, 25% over £250,000, with an effective 26.5% marginal rate between.
How does the calculation actually work?
Salary and employer NI are paid first and are deductible, so they reduce the profit that corporation tax is charged on. What remains pays corporation tax, and the balance can be paid as dividends. Personally, salary uses your allowance and bands first, then dividends stack on top — the first £500 tax-free, the rest at 10.75%, 35.75% or 39.35% depending on which band they land in. The calculator shows every one of those lines rather than a single mystery number.
What salary do most directors take?
Two common anchors: £6,708 (the Lower Earnings Limit) — the cheapest salary that still banks a qualifying year for the State Pension, with only a small employer-NI cost; or £12,570 (the personal allowance) — no income tax or employee NI, a bigger corporation-tax deduction, but more employer NI unless the Employment Allowance applies. Which wins depends on your company’s marginal corporation-tax rate — that’s exactly what the comparison strip shows.
Why can’t sole-director companies use the Employment Allowance?
The allowance (up to £10,500 off employer NI in 2026-27) excludes companies where the only employee paid above the secondary threshold is also a director. Hire a second person above the threshold and it generally becomes available — the toggle lets you model both.
What does this calculator deliberately leave out?
Other personal income, Scottish income-tax bands (dividend rates are UK-wide, salary bands differ in Scotland), student loans, pension contributions (often the biggest lever of all), benefits in kind, and multiple associated companies sharing the corporation-tax bands. It computes the statutory arithmetic transparently — an accountant turns it into advice.
Books that track the real numbers behind this.
Blankitt Finance keeps the corporation-tax calendar, dividends, payroll-cost modelling and the cap table in the same £14/mo product — so the split conversation with your accountant starts from live figures.