Salary vs Dividends Calculator
Limited company directors can take money out of the business as a salary, as dividends, or a combination of both.
Salary is tax-deductible for the company but triggers employer National Insurance and employee tax. Dividends come from post-tax profits but are taxed at lower rates and carry no employer NI. This calculator compares the net take-home for each strategy.
How the calculation works
We believe numbers should be transparent. Here is the formula behind this calculator.
Worked example
Worked example: extracting £60,000 profit in 2026/27
Examples at common levels
See how the numbers change at typical input levels, using the updated for tax year 2026/27 rates.
| Scenario | Most tax-efficient strategy | Take-home with the best strategy | All salary take-home | Salary + dividends take-home | All dividends take-home |
|---|---|---|---|---|---|
| £30,000 profit | Salary + dividends | £24,657.42 | £22,771.77 | £24,657.42 | £23,317.38 |
| £60,000 profit | Salary + dividends | £46,831.17 | £41,196.53 | £46,831.17 | £44,806.75 |
| £100,000 profit | Salary + dividends | £66,543.15 | £61,370.44 | £66,543.15 | £64,889.25 |
| £200,000 profit | Salary + dividends | £110,520.44 | £104,305.97 | £110,520.44 | £107,906.47 |
Important assumptions
- Uses the £50,000–£250,000 corporation tax marginal relief band where profits fall inside it.
- Employee National Insurance on salary assumes the salary is the director’s only employment income.
- Excludes benefits in kind, pension contributions, and the value of the qualifying year for State Pension that a salary provides.
- Dividend allowance of £500 is applied within the calculation.
Rates & official sources
Every calculation is based on the official rates and rules published by GOV.UK and HMRC.
Frequently asked questions
Is it better to take salary or dividends as a director?
Usually a small salary up to the National Insurance threshold plus dividends for the rest. Salary is deductible against corporation tax and protects your National Insurance record, while dividends are taxed at lower rates and carry no employer NI.
What salary should a director pay themselves?
Many pay up to the Income Tax Personal Allowance and National Insurance Primary Threshold (£12,570 in 2026/27) to get a tax-free salary and National Insurance credits, then take dividends for the rest.
Are dividends subject to employer National Insurance?
No. Dividends are paid from post-tax profits and are not subject to National Insurance — that is why they are usually more efficient than salary above the tax-free threshold.
Does taking all dividends affect my State Pension?
Yes. Dividends do not count towards National Insurance qualifying years. You generally need a salary above the Lower Earnings Limit (or other qualifying contributions) to build your State Pension entitlement.
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Read the guideThese calculations are estimates for guidance only and are not professional financial, tax or legal advice. UK rates and rules change, so always verify important figures with official GOV.UK / HMRC information or speak to a qualified professional. See our full disclaimer.