Dividend vs salary calculator (limited company directors)

How it works

If you run your own limited company, you can pay yourself a salary, dividends, or a mix. Each route is taxed differently, so the mix changes how much of the company’s profit ends up in your pocket. This calculator compares four options for a single-director company.

The four options

• All salary: the company pays out its whole profit as salary plus employer National Insurance.
• Salary at the NI threshold (£12,570) with the rest as dividends.
• Salary at the Personal Allowance (£12,570) with the rest as dividends.
• Your own salary if you enter one.

How each is taxed

Salary is a business expense, so it reduces corporation tax. But it carries employer National Insurance at 15% above £5,000, employee National Insurance and income tax.

Dividends are paid from profit after corporation tax. Corporation tax is 19% on profits up to £50,000 and 25% above £250,000, with marginal relief in between. Dividends then carry no National Insurance, and the first £500 is tax-free. The rest is taxed at 10.75%, 35.75% or 39.35%, depending on which band they fall in once your salary is counted first.

Assumptions

All profit after corporation tax is paid as dividends in the same tax year, the company has a 12-month accounting period and no associated companies, and there’s no Employment Allowance (it isn’t available when a director is the only employee). Pension contributions aren’t included, though employer pension contributions are often the most tax-efficient route of all.

Why a small salary usually wins

A salary up to the National Insurance threshold costs little or nothing in employee National Insurance and income tax, because it is covered by the Personal Allowance. It still counts towards your State Pension record and reduces the company’s taxable profit. Above that, each extra pound of salary attracts employer and employee National Insurance as well as income tax, while a dividend from the same profit only bears corporation tax and dividend tax. For most single- director companies that makes a modest salary plus dividends the more efficient mix.

The balance can change at higher profits, when the Personal Allowance starts to taper, or when you have other income such as a job or rental profits that uses up your tax bands first. Use the custom salary box to test the mix your accountant suggests, and remember that dividends can only be paid from profits the company has actually made.

Rates verified against HMRC on 5 October 2026.

Worked example

With £80,000 profit, taking it all as salary leaves £51,283 after all taxes. The best option is “salary at the ni threshold + dividends”: corporation tax of £13,818, dividends of £52,476 and dividend tax of £9,282, leaving £55,765.

Corporation tax on £100,000 of profit, for comparison, is £22,750.