Salary vs Dividend Calculator United Kingdom
This salary vs dividend calculator compares a director's net cash from extra salary or a dividend in 2026/27, at UK Corporation Tax, dividend and NI rates.
What it does
The Salary vs Dividend Calculator shows a company director how much net cash they keep from extracting a slice of company profit as extra salary versus as a dividend, for one chosen tax band, using 2026/27 UK rates.
Data sources & parameters
The figures below drive this calculator. We keep them aligned with the latest official guidance, and each result recalculates automatically whenever a value changes.
| Parameter | Value | Source | Last updated |
|---|---|---|---|
| Dividend tax rate — basic rate band | 0.1075 | gov.uk | Effective 2026-04-062026/27 rates (Budget 2025) continue: the April 2027 rise covers savings and property income, not dividends. Row now open-ended. Source: gov.uk; audit 2026-09-23 |
| Dividend tax rate — higher rate band | 0.3575 | gov.uk | Effective 2026-04-062026/27 rates (Budget 2025) continue: the April 2027 rise covers savings and property income, not dividends. Row now open-ended. Source: gov.uk; audit 2026-09-23 |
| Dividend tax rate — additional rate band | 0.3935 | gov.uk | Effective 2026-04-062026/27 rates (Budget 2025) continue: the April 2027 rise covers savings and property income, not dividends. Row now open-ended. Source: gov.uk; audit 2026-09-23 |
| Income Tax rate — basic rate band | 0.2 | gov.uk | Effective 2026-04-06 |
| Income Tax rate — higher rate band | 0.4 | gov.uk | Effective 2026-04-06 |
| Income Tax rate — additional rate band | 0.45 | gov.uk | Effective 2026-04-06 |
| Class 1 NI — main employee rate (below UEL) | 0.08 | gov.uk | Effective 2026-04-06Rate set in statute with no change announced for 2027/28, so the row is now open-ended. Source: gov.uk National Insurance rates; audit 2026-09-23 |
| Class 1 NI — employee rate above UEL | 0.02 | gov.uk | Effective 2026-04-06Rate set in statute with no change announced for 2027/28, so the row is now open-ended. Source: gov.uk National Insurance rates; audit 2026-09-23 |
| Class 1 NI — employer secondary rate | 0.15 | gov.uk | Effective 2026-04-06 |
We always strive to use the latest data for every variable so our results and reports are as accurate as possible. Even so, errors are possible — you should not rely on this tool or its report alone, and we accept no liability for any decision made based on it.
The formula
Dividend net = profit × (1 − corp rate) × (1 − dividend rate for band); Salary net = profit ÷ (1 + employer NI) × (1 − income tax − employee NI)
How it works
It runs the same profit through both routes. The dividend route deducts Corporation Tax first and then the dividend tax rate for your band. The salary route is Corporation-Tax deductible but carries employer National Insurance on top, plus your Income Tax and employee NI, so the calculator strips those out to leave the net figure.
Where it is used
- Deciding how a director should draw the next slice of profit
- Comparing the tax cost of salary and dividends in one band
- Sizing the gap before speaking to an accountant
Worked example
Extracting £20,000.00 of profit in the higher-rate band leaves … as a dividend versus … as salary — a difference of ….
The two main ways to take money out of your own limited company are extra salary and a dividend, and they are taxed in very different ways. This calculator takes a fixed amount of company profit and shows how much net cash you keep from each route, for one tax band, at 2026/27 UK rates. It is a simplified estimate that shows the size of the gap, not a full extraction plan.
How the two routes are taxed
A dividend is paid out of profit that has already been charged Corporation Tax. The company pays Corporation Tax on the profit, and you then pay dividend tax on what is left. Dividend rates are lower than Income Tax rates and carry no National Insurance.
Salary works the other way round. It is a deductible business expense, so it reduces the profit charged to Corporation Tax. But the company pays employer National Insurance on top of the gross salary, and you pay Income Tax and employee National Insurance on what you receive. Because the same profit has to cover both the gross salary and the employer NI on it, the gross salary it can fund is smaller than the profit figure.
What the calculator does
Enter the company profit you want to extract, choose your tax band and, if needed, set your company’s Corporation Tax rate. For the dividend route the tool deducts Corporation Tax and applies the dividend rate for your band. For the salary route it works out the gross salary the profit can fund after employer National Insurance, then deducts Income Tax and employee National Insurance. The result is two net figures and the difference between them.
A worked example
Suppose you want to extract £20,000 of profit, you are a higher rate taxpayer, and your company pays Corporation Tax at 25%.
On the dividend route, Corporation Tax leaves £15,000 to distribute. The higher dividend rate of 35.75% applies, leaving £15,000 × 0.6425 = £9,637.50 in your hand.
On the salary route, the £20,000 has to cover the gross salary and 15% employer National Insurance. £20,000 ÷ 1.15 gives a gross salary of about £17,391. Above the upper earnings limit you pay 40% Income Tax and 2% employee National Insurance, so you keep 58%, about £10,086.96.
Here the salary route comes out about £449 ahead, because employee National Insurance is only 2% above the upper earnings limit while the higher dividend rate is steep. In the basic band the result reverses: the dividend leaves £13,387.50 against £12,521.74 from salary, about £866 more, because employee National Insurance is 8% and the basic dividend rate is 10.75%.
Why the band matters so much
In the basic band, salary carries 8% employee National Insurance and the dividend rate is 10.75%, so dividends win. In the higher band, employee National Insurance falls to 2% while the dividend rate rises to 35.75%, which narrows or reverses the gap. In the additional band the 39.35% dividend rate is close to the combined salary burden, so the two routes end up close together: on the same £20,000 at 25% Corporation Tax, salary leaves about £9,217 and a dividend £9,098. A rule that dividends are always better does not hold, which is why the band is the most important input.
Assumptions and limitations
This is a simplified single-band estimate. It applies one tax band to the whole amount rather than splitting it across thresholds. It ignores the dividend allowance, which taxes the first slice of dividends at zero, and it ignores the personal allowance and how salary and dividends interact as your total income rises. It also does not model the small tax-efficient salary up to the National Insurance threshold that most directors draw before topping up with dividends.
In practice the best approach usually combines a modest salary with dividends and depends on your other income, company profit and pension plans. The rates here are the 2026/27 UK figures, stored as parameters and updated from gov.uk, but the best split for you needs a full multi-band calculation. Use this tool to understand the mechanics and the size of the gap, then confirm any decision with an accountant. A separate multi-band optimiser handles the combined salary and dividend case.
About This Salary vs Dividend Calculator
Use this salary vs dividend calculator to get an instant, accurate estimate. The figures follow official GOV.UK guidance and every rate and threshold is kept up to date for 2026. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.
Tax year 2026
Frequently asked questions
Is it better to take salary or dividends from my company?
Why are salary and dividends taxed so differently?
What tax rates does the calculator use?
Does this replace advice from an accountant?
What is the corporation tax rate input for?
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