Dividend vs Salary Calculator
Contractor Calculator's Dividend vs Salary Calculator helps UK limited company directors find the most tax-efficient way to extract profits. Enter your total company profit and compare take-home pay at different salary levels using HMRC 2025/26 tax rates.
Your company's gross revenue available for salary and dividends
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Older changes are shown for reference but don't have historical rate data available for comparison.
How is this calculated?
For each salary level, the calculator computes: (1) Employer NI on the salary, (2) remaining profit after salary and employer NI, (3) Corporation Tax on that profit, (4) dividends from post-tax profit, (5) personal Income Tax and NI on salary, (6) dividend tax on the dividends. Take-home = salary + dividends - all personal taxes.
The optimal split balances the Corporation Tax savings from higher salary (salary is a deductible expense) against the extra NI cost of higher salary and the lower tax rate on dividends.
How have these tax rates changed?
This calculator applies to contractors outside IR35. Not sure about your IR35 status? Use our IR35 Status Estimator. Want to see the full picture? Use our Compare Structures calculator to compare all structures including inside IR35.
Frequently Asked Questions
What is the optimal salary for a UK limited company director in 2025/26?
For most single-director limited companies in 2025/26, the optimal salary is £12,570 — the Personal Allowance threshold. This avoids Income Tax on the salary while preserving your state pension qualifying year. Some directors prefer a lower salary of £5,000 (the employer NI threshold) to avoid employer NI entirely, but this may not qualify as a pension-qualifying year.
Is it better to take dividends or salary from my limited company?
In most cases, a combination of low salary plus dividends is the most tax-efficient approach. Salary attracts National Insurance (both employee and employer), while dividends are taxed at lower rates and have no NI. However, salary is a deductible business expense reducing Corporation Tax, so the optimal split depends on your total profit level.
How are dividends taxed in the UK in 2025/26?
After the £500 tax-free dividend allowance, dividends are taxed at 8.75% (basic rate), 33.75% (higher rate), or 39.35% (additional rate). Dividends stack on top of your salary income to determine which band they fall in. There is no National Insurance on dividend income.
Can I take all my limited company profits as dividends?
You can only pay dividends from distributable profits — that is, profit after Corporation Tax. You cannot pay dividends if your company does not have sufficient retained profits. Paying yourself a salary is not dependent on profits in the same way, but it increases company costs.
How does employer NI affect the salary vs dividend decision?
From April 2025, employer NI is 15% on salary above £5,000. This means every £1,000 of salary above £5,000 costs the company an extra £150 in employer NI. This cost reduces the profit available for dividends. The calculator above factors this in to show you the true net effect of different salary levels.
These calculations are estimates based on current published tax rates. They do not constitute financial, tax, or legal advice. Always consult a qualified accountant for your specific situation.
Tax rates sourced from HMRC published rates for the 2025/26 tax year. Last verified: March 2026.