Salary or dividends

The calculator follows the money from the company to you, using the rates for the tax year from 6 April 2026 to 5 April 2027 in England, Wales and Northern Ireland.

1. Salary. The company pays employer's National Insurance at 15% on salary above £5,000 a year. The salary and that National Insurance are both costs for Corporation Tax.
2. Corporation Tax. The profit left after salary is taxed at 19% up to £50,000, 25% over £250,000, and 25% less marginal relief in between.
3. Dividends. Whatever is left after Corporation Tax is paid to you as dividends. Dividends aren't a cost for Corporation Tax.
4. Your tax on the salary. You pay National Insurance at 8% on salary between £12,570 and £50,270, and 2% above that. Income Tax is 20%, 40% and 45%, after a Personal Allowance of £12,570.
5. Your tax on the dividends. Dividends are added on top of your salary and other income. Any Personal Allowance left covers them first, then the £500 dividend allowance, then they're taxed at 10.75%, 35.75% and 39.35%. The £500 is taxed at 0% but still uses up £500 of your tax bands.
6. The Personal Allowance. It goes down by £1 for every £2 of income over £100,000, dividends included, and there's none from £125,140.

It assumes you own all the shares and the company pays out all its profit after Corporation Tax as dividends in the same tax year. It also assumes one company, with a 12-month accounting period and no associated companies. A director's National Insurance is worked out over the whole year, so the yearly thresholds apply however the salary is paid.

The Employment Allowance takes up to £10,500 a year off a company's employer's National Insurance. A company can't claim it if it has one director and that director is the only employee paid above £5,000 a year, the point where employer's National Insurance starts. So a company where the owner is the only person on the payroll usually can't claim it.

With the allowance, a company can pay up to £75,000 of salary before it pays any employer's National Insurance, and salary compares much better with dividends. If you employ other people, their National Insurance uses the same allowance, so less of it may be left for your salary. Only one company in a group can claim it.

Many directors who own their company pay themselves a small salary and take the rest as dividends.

• Up to £12,570, a salary has no Income Tax if it's your only income, and no National Insurance for you.
• The salary and the employer's National Insurance on it reduce the company's Corporation Tax. Dividends don't.
• A salary of at least £6,708 a year counts towards your State Pension, even though you pay no National Insurance on it until £12,570.
• Above £12,570, your own National Insurance starts at 8%, and above £50,270 the salary is taxed at 40%.

Without the Employment Allowance, raising the salary from £5,000 to £12,570 costs the company £1,136 of employer's National Insurance. The extra salary and that National Insurance, £8,706 in all, come off the profit Corporation Tax is charged on, which saves £1,654 at 19% and more at higher rates. Other income that uses up your Personal Allowance changes the sums, and so does a high income, where the Personal Allowance tapers away.

At high profits the gap narrows and all salary comes out ahead, from around £350,000 of profit without the Employment Allowance and from much lower profits with it. The calculator shows where your figures fall.

These figures are for the 2026 to 2027 tax year, which ends on 5 April 2027. The Budget on 28 October 2026 didn't change the headline rates of Income Tax or National Insurance, or dividend tax rates, and the Personal Allowance and basic rate band are fixed until 5 April 2031. If your other income is rent or interest, it's taxed at 24%, 44% and 49% from 6 April 2027. From April 2028 the government plans to change the rules on how companies pay out to shareholders, but HM Treasury says ordinary dividends will still be taxed as dividends.

Rates checked on GOV.UK on 28 October 2026.

• Pension contributions paid by the company, which are a cost for Corporation Tax and often part of how directors pay themselves.
• Student loan repayments, which are taken from salary and can be due on dividends too.
• Scottish Income Tax rates, which apply to salary but not to dividends for Scottish taxpayers.
• Other shareholders, such as a husband or wife who owns some of the shares and has their own allowances and bands.
• Profit kept in the company, and dividends paid from earlier years' profits.
• The High Income Child Benefit Charge, benefits in kind, expenses, savings income and Income Tax reliefs.