Dividend vs salary calculator
Salary saves corporation tax but costs National Insurance; dividends do the reverse. The sweep tries every £100 of salary and shows which wins at your numbers.
Rates for the 2026/27 tax year. Checked 6 November 2026.
| Salary | Corp. tax | Personal tax & NI | Take-home |
|---|---|---|---|
| No salary, all dividends£0 | £24,870 | £15,746 | £67,384 |
| Salary at the employer NI threshold£5,000 | £23,545 | £16,220 | £68,235 |
| Salary at the personal allowance£12,570 | £21,238 | £17,774 | £68,988 |
| Best in the sweep£12,570 | £21,238 | £17,774 | £68,988 |
| Your choice£12,570 | £21,238 | £17,774 | £68,988 |
Salary is a company expense, so it saves corporation tax. Above £5,000 it costs employer NI, and above £12,570 income tax and employee NI too. The sweep tests every £100 up to £60,000. Pension contributions are not varied in the sweep.
Checked salary: £12,570.00. Below £6,500 a year you may not earn a qualifying year for the state pension.
Worked example: £500 a day, 220 days
For most sole directors in 2026/27 the sweep lands on a £12,570 salary. On £110,000 of revenue and £2,000 of costs, that salary uses your personal allowance, costs £1,135.50 of employer NI and saves corporation tax on £13,705.50. Taking no salary means corporation tax on all the profit, dividend tax on the whole payout and a wasted allowance.
Why £5,000 and £12,570 matter
Employer NI starts at £5,000 of salary; income tax and employee NI at £12,570. Between the two, each pound of salary costs 15% NI but saves 19% to 26.5% corporation tax, so the allowance usually wins. Above it, salary is taxed as income plus NI when it could have been dividends. Go higher only if you need pensionable earnings or a mortgage lender wants to see payslips.
When this calculator is wrong for you
- You have other employment income using your allowance and bands.
- The company has two or more directors and qualifies for the Employment Allowance.
- You want to leave profit in the company or make large pension contributions.
- You live in Scotland.
Questions people ask
Is £12,570 the best director salary for 2026/27?
Usually, for a sole director. With very high profits the saving shrinks, and the sweep shows whether that applies at your numbers.
Does a director’s salary count towards the state pension?
Yes, once it is above the lower earnings limit (about £6,500). That earns a qualifying year even though no NI is paid between there and £12,570.
Can I pay a salary to my spouse?
Only for genuine work at a commercial rate. This calculator models one director.
Why does the sweep stop at £60,000?
Because beyond the higher-rate threshold more salary is almost never better than dividends for a sole director.
How this is worked out
For each candidate salary the limited-company model runs in full: revenue less salary, employer NI at 15% above £5,000, expenses and pension; corporation tax with marginal relief; post-tax profit paid as dividends; income tax and employee NI on salary; dividend tax on dividends stacked above salary. The best salary is the one with the highest take-home among every £100 step to £60,000 plus the three conventional candidates.
Full formulas, rounding rules and test cases are on the methodology page. Every rate update is listed in the changelog.