Dividend vs Salary Calculator 2026/27
Dividend tax rose 2 percentage points on 6 April 2026 — to 10.75% basic and 35.75% higher. Enter your company profit and see the salary/dividend split that leaves you with the most.
Recommended split at £50,000 profit
£12,500 salary + £29,464 dividends
Take-home £38,857.67 — that is £3,564.16 more than paying it all as salary. A salary at roughly the personal allowance is deductible against corporation tax while staying under the National Insurance thresholds; the rest is taken more cheaply as dividends.
Your split: £12,500 salary
| Company profit | £50,000.00 |
| Salary | £12,500.00 |
| Employer NI (15%) | −£1,125.00 |
| Corporation tax | −£6,911.25 |
| Dividends available | £29,463.75 |
| Income tax on salary | −£0.00 |
| Employee NI | −£0.00 |
| Dividend tax | −£3,106.08 |
| Your take-home | £38,857.67 |
| Total tax (company + personal) | £11,142.33 · 22.3% |
| Strategy | Salary | Dividends | Total tax | Take-home |
|---|---|---|---|---|
| All salary | £44,130.43 | £0.00 | £14,706.49 | £35,293.51 |
| Recommended split | £12,500.00 | £29,463.75 | £11,142.33 | £38,857.67 |
| All dividends | £0.00 | £40,500.00 | £12,448.73 | £37,551.28 |
2026/27 rates: dividend tax 10.75% basic, 35.75% higher, 39.35% additional; dividend allowance £500; employer NI 15% above £5,000; corporation tax 19–25% with marginal relief. Models a single-director company with no other employees, so the £10,500 Employment Allowance is not available. Assumes all post-tax profit is distributed. Estimates only — not tax advice.
What changed on 6 April 2026
| Dividend band | 2025/26 | 2026/27 | Change |
|---|---|---|---|
| Ordinary (basic) | 8.75% | 10.75% | +2 pp |
| Upper (higher) | 33.75% | 35.75% | +2 pp |
| Additional | 39.35% | 39.35% | unchanged |
| Dividend allowance | £500 | £500 | unchanged |
The Autumn Budget 2025 raised the ordinary and upper dividend rates by two percentage points each from 6 April 2026. The additional rate was left alone at 39.35% — a detail that is widely misreported, so it is worth stating plainly. In cash terms the change costs a basic or higher-rate taxpayer £20 more tax per £1,000 of dividends.
Why low salary + dividends still usually wins
The trade-off is a tug-of-war between two effects. Salary is a deductible expense: every pound of it reduces the profit on which corporation tax is charged, so it carries relief worth 19% to 26.5%. Dividends get no such relief — they are paid out of profit that has already been taxed.
But salary attracts National Insurance from both sides: 8% employee NI above £12,570, and 15% employer NI above just £5,000. Dividends attract none. For a single-director company that cannot claim the Employment Allowance, that 15% employer charge is the decisive number.
The optimum lands where the corporation-tax relief on salary is still being harvested but the NI charges have not yet bitten — in practice, a salary at roughly the personal allowance. Below that you waste tax-free income; above it you start paying income tax and employee NI on money that could have come out as dividends more cheaply. Even after the 2 point rise, that structure still beats paying yourself entirely in salary at every profit level this calculator covers.
The £500 dividend allowance is the only genuinely tax-free slice, and it is small — a tenth of what it was in 2017. It is also a zero-rate band rather than a true exemption: it still uses up basic-rate band space, so it does not push the rest of your dividends into a lower band.
Two things this model deliberately leaves out. It assumes all post-tax profit is distributed in the same year — retaining profit in the company, or paying it into a pension, can beat both routes and is worth proper advice. And dividends held inside an ISA are free of dividend tax altogether, which matters if you are investing personally rather than extracting from your own company.
Best split by company profit
£30,000 to £150,000 of annual company profit
Dividend and salary questions
What are the dividend tax rates for 2026/27?
From 6 April 2026 the ordinary (basic) rate is 10.75% and the upper (higher) rate is 35.75% — both up 2 percentage points from 8.75% and 33.75%. The additional rate is unchanged at 39.35%. The dividend allowance stays at £500. For a basic or higher-rate taxpayer that is an extra £20 of tax on every £1,000 of dividends.
Is it still better to take dividends than salary?
For most single-director companies, yes — but by less than before. Dividends still avoid National Insurance entirely (both the 8% employee and the 15% employer charge), which usually outweighs the fact that dividends are paid from post-corporation-tax profit while salary is a deductible expense. The 2 point rise narrows the gap without closing it.
What salary should a director take in 2026/27?
The calculator's sweep points to roughly the personal allowance — around £12,500. That level is fully deductible against corporation tax, generates no income tax and no employee National Insurance, and preserves your State Pension qualifying year. Employer NI is due above £5,000, but the corporation tax relief on the salary more than offsets it.
Why can't my company claim the £10,500 Employment Allowance?
Because a company whose only employee liable for employer NI is a sole director is specifically excluded from the Employment Allowance. This calculator therefore models £0 of allowance. If you have a second employee on the payroll above the secondary threshold, your company may become eligible — and the optimal salary would then be higher.
How is corporation tax worked out?
Profits up to £50,000 are taxed at the 19% small profits rate and profits from £250,000 at the 25% main rate. In between, marginal relief applies, which produces an effective rate of 26.5% on the slice between the two limits. Your salary and the employer NI on it are deducted before corporation tax is calculated.
2026/27 figures for a single-director UK company with no other employees. Sources: gov.uk (dividend tax rates, corporation tax rates and marginal relief, Employment Allowance eligibility). Ignores pension contributions, benefits in kind, VAT and retained profit. Estimates only — not tax advice. Speak to an accountant before restructuring how you pay yourself.