Directors of small UK companies usually pay themselves a small salary and take the rest as dividends, because dividends carry no National Insurance. The best split changed in 2026/27: dividend tax rose by 2 points from 6 April 2026, and employer NI has been 15% above £5,000 since April 2025. This calculator runs the full chain, from company profit to money in your account, and compares the three salary levels most directors choose between.
Figures checked by Muhammad Ahmad against GOV.UK: Tax on dividends, GOV.UK: Corporation Tax rates and reliefs and GOV.UK: Rates and thresholds for employers 2026 to 2027. Prices and rules change, so confirm with the official source before relying on them. How we check the math
How it works
Salary costs the company employer NI at 15% above £5,000. Companies whose only employee is a director can't use the Employment Allowance to offset it. You pay employee NI at 8% between £12,570 and £50,270 and 2% above, plus income tax on salary above your personal allowance.
Salary and employer NI are deductible, so the company pays corporation tax on what's left: 19% on profits up to £50,000, 25% above £250,000, and marginal relief in between (25% minus 3/200 of the gap below £250,000).
Everything left after corporation tax is paid out as dividends. The first £500 is tax-free; the rest is taxed at 10.75%, 35.75% or 39.35% depending on the band it falls into once it's stacked on top of your salary. Your personal allowance shrinks by £1 for every £2 of income above £100,000.
The calculation matches HMRC's own 2026/27 dividend example to the penny. It assumes all profit is paid out in the same tax year and ignores pension contributions, other income and Scottish income tax bands.
A worked example
With £100,000 of profit and a £12,570 salary, employer NI is £1,135.50 and corporation tax £19,118. That leaves £67,176 of dividends, taxed at £14,537, for a take-home of about £65,210. A £5,000 salary gives £64,457 and a £50,270 salary gives £62,240, so for a one-person company at this profit the £12,570 salary comes out ahead by about £750 a year.
Questions people ask
What is the best director's salary for 2026/27?
For a one-person company with no Employment Allowance, a salary around £12,570 usually gives the highest take-home, even though it costs some employer NI: the corporation tax it saves outweighs that. Run your own profit through the calculator, because the answer shifts with profit and other income.
What are the dividend tax rates for 2026/27?
10.75% in the basic-rate band, 35.75% in the higher-rate band and 39.35% for the additional rate, after a £500 dividend allowance. The first two rose by 2 points on 6 April 2026.
Why do dividends pay less tax than salary?
Dividends carry no National Insurance, and their rates are lower than income tax rates. But they're paid from profit after corporation tax, so the total tax on a pound of profit taken as dividends is higher than the dividend rate alone suggests.
Does a £12,570 salary still qualify for the state pension?
Yes. A salary above the lower earnings limit builds National Insurance qualifying years, even though no employee NI is paid below £12,570.
Can my company pay dividends if it made a loss?
No. Dividends can only be paid from distributable profits, meaning profits after corporation tax, including those kept from earlier years.
Guides
- Inside vs Outside IR35 in 2026/27: The Gap Is Smaller Than You ThinkContractors often assume an inside-IR35 role costs 20% or more of their take-home. After the April 2026 dividend tax rise, the real gap at typical day rates is closer to 5% to 7%.
- Salary or Dividends in 2026/27: The Best Mix for a UK Limited Company DirectorDividend tax rose by 2 points in April 2026, and employer NI is 15% above £5,000. Here's how the numbers now work out for a one-person company, and which salary comes out ahead.