Mortgages & Money2 min check

Director Salary & Dividend Calculator (2026/27)

Model the optimal salary + dividend split for a UK limited company director, with corporation tax and personal tax included.

Short answer

A suitable salary-and-dividend split depends on company profit, other income and whether the company can claim the £10,500 Employment Allowance. Dividend tax rates rose in 2026/27, so review the mix with an accountant rather than relying on an old rule of thumb.

Step 1 of 10%

Calculation method, coverage and version

Inputs used: Pre-salary company profit, Director salary to take, Eligible for Employment Allowance?.
Calculation approach: The calculator applies the rules and assumptions described in “How it works” to the values you enter. Rounding can cause small differences from an official or provider calculation.
Coverage: Mortgages & Money. UK nations, tax treatment, local rules and provider criteria can differ; check the official sources shown below before acting.
Content version: No page-specific review date is currently published. Treat the result as indicative and verify current rules independently.

Not included unless explicitly requested: personal circumstances not entered, provider discretion, future rule changes, professional fees and case-specific exceptions. Read the full calculator methodology.

Primary sources and official verification

Use these official sources to verify current rules before acting. Coverage and dates can differ across England, Scotland, Wales and Northern Ireland.

See the sitewide source policy.

How it works

Limited company directors typically minimise tax by combining a small salary (to use the personal allowance and earn a State Pension credit) with dividends (no NI, lower headline rates). Corporation Tax is paid on profit before dividends. Then dividends are taxed personally after the £500 allowance.

Worked example

Use the calculator to compare the available salary levels. Corporation Tax, employer NI and dividend tax are applied in sequence; marginal Corporation Tax relief and other personal income are excluded.

Who should use this

•Sole-director limited company contractors
•Small business owner-managers
•Directors with a spouse on the share register
•Anyone restructuring from sole trader to Ltd

Common mistakes

×Paying salary above £12,570 unnecessarily (triggers 20% tax + 8% NI)
×Forgetting the £5k Employment Allowance needs more than one employee since 2020
×Declaring dividends without enough distributable reserves (illegal)
×Missing the £500 dividend allowance shrunk from £2,000

Frequently asked questions

Why £12,570 salary specifically?▾

It uses the full personal allowance with no Income Tax payable, while still earning a qualifying State Pension year via NI credit (you pay employee NI of about £20).

What is the Employment Allowance?▾

Up to £10,500 off eligible employers' Class 1 National Insurance bill in 2026/27. A company with only one employee who is also a director cannot claim.

Can I pay my spouse a salary?▾

Yes if they genuinely work for the business, paid at a reasonable rate. HMRC scrutinises 'paper' employment.

How are dividends taxed?▾

For 2026/27 the £500 dividend allowance applies, then rates are 10.75% (basic), 35.75% (higher) and 39.35% (additional). Dividends are stacked on top of salary.

Should I use a pension instead of dividends?▾

Often yes for surplus profit — employer pension contributions are corp tax deductible AND tax-free for you (within Annual Allowance).

Do I need an accountant?▾

Strongly recommended for limited companies — annual accounts, CT600, payroll, dividend paperwork, and Companies House filings are all required.

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Sole Trader vs Ltd →Dividend Tax →IR35 Calculator →Self-Employed Tax →Salary Sacrifice →VAT Registration →