Director Salary vs Dividend Calculator
Compare a limited company director salary and dividend mix for the 2026/27 tax year. The calculator estimates corporation tax, employer National Insurance, employee National Insurance, income tax, dividend tax and company cash left after extraction.
Company and Director Inputs
Estimated Director Take-Home
Auto dividend mode distributes available post-tax profit after salary and company taxes.
What the Calculator Is Designed to Show
Company layer
Salary, employer National Insurance and employer pension contributions reduce company profit before corporation tax. Dividends are paid from post-tax company profit.
Personal layer
Salary is taxed through PAYE and employee National Insurance. Dividends sit on top of other income and use the dividend allowance and dividend tax rates.
Planning layer
The most tax-efficient mix is not always the best decision. Mortgage applications, state pension record, cash flow, benefits, pensions and risk should also be reviewed.
How to Use This Director Calculator
Enter company profit before salary, employer National Insurance, pension and corporation tax. Then enter the salary you want to test. A common planning point is salary near the personal allowance, but the right figure can change with other income, Employment Allowance, pension needs, student loans, benefits and the director’s National Insurance record. If the company can claim Employment Allowance, select yes; many single-director companies cannot, so check the rules before relying on it.
Use auto dividend mode when you want to see what happens if all available post-tax profit is distributed. Use manual dividend mode when the company will keep some cash for tax bills, equipment, working capital, loan repayments or reserves. Add other taxable income because dividends are stacked on top of salary and other income when tax bands are used. For Scotland, the calculator uses Scottish rates for salary income and UK dividend bands for dividends.
This page is a planning calculator, not tax advice. It simplifies some matters, including director annual National Insurance calculations, benefit-in-kind issues, loans to participators, close company rules, associated company adjustments, marginal relief detail and pension deductibility tests. Use it to frame questions for an accountant, not as the final payroll instruction.
Formula and Method
employer NI = max(0, salary - secondary threshold) x employer NI rate - Employment Allowance used
taxable company profit = profit before director pay - salary - employer NI - employer pension contribution
corporation tax = small profits, main rate or marginal relief estimate based on taxable company profit
available dividend = taxable company profit - corporation tax
employee NI = salary above employee thresholds x employee NI rates
income tax = salary and other income after personal allowance x regional income tax rates
dividend tax = taxable dividends after dividend allowance x dividend tax rates
director take-home = salary - income tax - employee NI + dividend - dividend tax
The calculator applies the personal allowance taper for income above £100,000. It also reduces corporation tax thresholds by the number of associated companies entered. That is still a simplified estimate, especially where accounting periods, close investment-holding rules, pension deductibility or non-standard income apply.
2026/27 Rates Built Into the Tool
| Area | Rate or allowance | Used in the calculator | Important note |
|---|---|---|---|
| Personal allowance | £12,570, tapered by £1 for every £2 above £100,000 | Yes | May be reduced to zero by high income. |
| England, Wales and Northern Ireland income tax | 20%, 40%, 45% | Yes | Applied to salary and other non-dividend income. |
| Scottish income tax | 19%, 20%, 21%, 42%, 45%, 48% | Yes | Applied to salary and other non-savings, non-dividend income for Scottish taxpayers. |
| Dividend allowance | £500 | Yes | Allowance uses band space but has a 0% dividend rate. |
| Dividend tax | 8.75%, 33.75%, 39.35% | Yes | Dividends are stacked on top of other income. |
| Employee National Insurance | 8% main rate, 2% above upper earnings limit | Yes | Annual approximation for directors. |
| Employer National Insurance | 15% above secondary threshold | Yes | Employment Allowance can reduce it where eligible. |
| Corporation tax | 19% small profits, 25% main rate, marginal relief between thresholds | Yes | Thresholds are divided by associated company count. |
Salary Versus Dividend Reading Notes
- Salary is deductible for corporation tax. Paying salary can reduce company profit, but it can create employer NI and personal PAYE costs.
- Dividends are paid after corporation tax. They do not create employee or employer NI, but they are not deducted before corporation tax.
- Other income matters. A director with another job, rent, pension income or high savings income may have less basic-rate band left for dividends.
- Cash retained is not wasted. Leaving profit in the company can fund tax bills, equipment, staff, stock, pension contributions or a quieter trading period.
- Non-tax factors matter. Mortgage evidence, state pension years, maternity rights, pension funding, benefits and risk can outweigh a small tax saving.
Worked Example
A company has £80,000 profit before director pay. The director takes £12,570 salary, no employer pension contribution and no Employment Allowance. Employer National Insurance is estimated on salary above the secondary threshold. The remaining taxable company profit is charged to corporation tax using the small profits and marginal relief method. Auto dividend mode then distributes the post-tax company profit.
The director receives salary net of PAYE and employee NI, plus dividends after dividend tax. The dividend tax is calculated after the £500 dividend allowance and after salary has used part of the tax band. If the same director chose a higher salary, the company corporation tax may fall because salary is deductible, but PAYE and employee or employer NI may rise. The useful comparison is the final take-home, company cash left and total tax lines together.
FAQ
Why is my accountant’s result different?
Accountants may account for director annual NI rules, exact pay dates, pension deductibility, associated companies, benefits, student loans, loan accounts, prior income and accounting-period timing. This calculator is an estimate for planning.
Can the company always pay the dividend shown?
No. Dividends need sufficient distributable profits and proper company records. Cash in the bank is not the only test.
Does Scotland change dividend tax?
Scottish income tax applies to non-savings, non-dividend income. Dividends use UK dividend rates, although salary taxed under Scottish bands can affect how much UK band space is left.
Sources
- GOV.UK. (2026). Income Tax rates and Personal Allowances. UK Government. Accessed 18 May 2026.
- GOV.UK. (2026). Tax on dividends. UK Government. Accessed 18 May 2026.
- GOV.UK. (2026). National Insurance rates and categories. UK Government. Accessed 18 May 2026.
- GOV.UK. (2026). Corporation Tax rates and reliefs. UK Government. Accessed 18 May 2026.
- Scottish Government. (2026). Scottish Income Tax rates and bands: 2026 to 2027. Scottish Government. Accessed 18 May 2026.