Free tool · 2026/27 rates
Dividend vs salary: how much should a director take?
Directors of their own companies choose how much to take as salary and how much as dividends. Salary is deductible for Corporation Tax but attracts National Insurance; dividends come out of profit after Corporation Tax and are taxed at the lower dividend rates with no National Insurance. This calculator takes the company's profit before any director pay and shows the total tax and your take-home at three salary levels: the one you enter, a salary at the £5,000 employer National Insurance threshold, and a salary at the £12,570 personal allowance. It uses the 2026/27 rates verified against GOV.UK, including the dividend rates of 10.75% and 35.75% that took effect in April 2026, and assumes you have no other income and extract all the remaining profit as dividends.
How the calculation works
Each scenario starts with the company's profit before any director pay. The salary is deducted together with employer National Insurance at 15% on the salary above £5,000. Corporation Tax is charged on what remains at 19% up to £50,000, 25% above £250,000 and the marginal rate in between. The profit after Corporation Tax is treated as paid out in full as dividends.
On the personal side, income tax is charged on the salary after the £12,570 personal allowance, and employee National Insurance at 8% on salary between £12,570 and £50,270. Dividends above the £500 dividend allowance are taxed at 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% above £125,140, using whatever part of the bands the salary has not used. The personal allowance is tapered away by £1 for every £2 of total income over £100,000.
Why £12,570 and £5,000
A salary of £12,570 is the personal allowance, so it carries no income tax, and it is deductible for Corporation Tax; it attracts employer National Insurance of 15% on the £7,570 above the secondary threshold, which a company with other employees can usually cover with the £10,500 Employment Allowance but a sole-director company cannot. A salary of £5,000 attracts no National Insurance at all but wastes part of the personal allowance against dividends, which are taxed at a lower rate than the Corporation Tax deduction saves. Either way the salary needs to exceed the lower earnings limit of £6,708 a year to count towards the State Pension.
What it leaves out
Other income such as employment, pensions or rental profit, pension contributions by the company, retaining profit rather than extracting it, dividends to a spouse, benefits in kind, and the Employment Allowance. These are the levers a director remuneration review adjusts. The figures are estimates under the 2026/27 rates and are not advice; see the advice disclaimer.
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