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Salary vs Dividend Calculator (2026/27)
How to take money out of your company tax-efficiently, updated for the April 2026 dividend rise
Salary and Dividends · 2026/27
What is the best salary and dividend split for you?
Tell it how much you plan to take out and how you were going to split it. It shows the tax on that split, the split that costs least, and the difference.
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Your split, the best split, and the difference
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Illustrative only, not financial advice. Both columns take the same total out of the company, so the comparison is like for like. Salary and employer National Insurance reduce the profit that corporation tax is charged on. Dividends are paid from profit after corporation tax, so the company needs more than the dividend itself to fund it. It assumes England, Wales or Northern Ireland rates, one director with no other income, and no Employment Allowance. Companies with more than one employee can often claim that allowance, which favours a higher salary. A company pension contribution is usually more tax efficient than either route and is not modelled here.
The rule of thumb broke in April, here's what replaced it
For a decade the owner-director playbook was settled. Pay a small salary to the National Insurance threshold, then take everything else as dividends. From 6 April 2026 that answer stopped being automatic. The Budget 2025 dividend tax rise narrowed the dividend advantage everywhere. The basic rate rose from 8.75% to 10.75%. The higher rate rose from 33.75% to 35.75%. For higher-rate directors of companies paying 25% corporation tax, the advantage was eliminated entirely. On those figures, salary now edges dividends outright.
Your corporation tax rate is 19% under £50,000 of profits, 25% over £250,000, with a sliding scale between.
Which income tax and NI bands the extraction lands in also matters, on top of your existing income.
How much you are taking is the third factor. The calculator above works through all three properly.
Small-company directors at basic rate still do clearly better on dividends. At the top of the system, the two routes converge to a near dead heat.
Both routes lose to a third one, for money you do not need to spend this year. An employer pension contribution from the company is corporation-tax deductible. It carries no National Insurance on either side, and no income tax until drawn. We put the three side by side in company pension contributions. The wider decisions are profit extraction, exit planning, and what the company is actually for. We cover those in our work with business owners and company directors. If a sale is on the horizon, Business Asset Disposal Relief changes the arithmetic again.
Frazer James is an independent, FCA-regulated firm of Certified Financial Planners. Advice covers the whole of the market, there is no initial fee, and the first meeting is free.
What changed in April 2026
Dividend tax rose two percentage points at basic and higher rate, 10.75% and 35.75%, while salary costs were unchanged. Every salary-vs-dividend comparison written before Budget 2025 now points the wrong way for some profiles.
Your corporation tax rate decides it
At 19%, dividends usually still win. At 25%, the profit takes a bigger haircut before any dividend is paid, and for higher-rate directors salary now comes out ahead. Between £50,000 and £250,000 of profits, you're on a sliding scale between the two.
The third route beats both
For profit you do not need as income this year, an employer pension contribution is deductible for corporation tax. There is no NI and no income tax on it now. The total tax cost is near zero on the way in. The real planning is deciding how much goes this way.
Since working together, I feel more organised, more secure and more positive about the future. The advice has been exceptionally valuable, financially, professionally and personally.
Questions directors ask about salary and dividends
Is it better to take salary or dividends in 2026/27?
It now genuinely depends. Directors of small companies (19% corporation tax) with income in the basic band still do better on dividends. The margin shrank in April 2026. Higher-rate directors of companies paying 25% corporation tax now typically do slightly better on salary. This is a reversal of the long-standing rule of thumb. Around the additional rate, the routes converge to within a few hundred pounds. The decision should then rest on second-order effects: pension funding, mortgage evidence, and timing.
How are dividends taxed in 2026/27?
The first £500 is covered by the dividend allowance. Above that, dividends are taxed at 10.75% in the basic rate band. The higher rate band applies a 35.75% tax rate. The additional rate is 39.35%. The basic and higher rates rose by two percentage points from April 2026. Dividends also count towards adjusted net income. Large dividends can taper away your personal allowance above £100,000.
Why do people still take a small salary?
A salary up to the £12,570 threshold costs little or no tax or employee NI. It is deductible for corporation tax. Critically, it banks a qualifying year for your State Pension.
It also creates relevant UK earnings, which dividends do not. This supports personal pension contributions.
That part of the old playbook survives. It is the everything-else-as-dividends half that now needs checking.
What about paying into a pension from the company instead?
For profit you don't need to live on this year, an employer pension contribution usually beats both routes. It is deductible against corporation tax. It carries no employer or employee National Insurance. It suffers no income tax until you draw it, typically in retirement, at lower rates, with 25% tax-free. The constraints are the £60,000 annual allowance, tapered for high earners. The money is also locked away until at least age 55, rising to 57 from 2028.
What corporation tax rate does my company pay?
19% if profits are £50,000 or under. 25% if profits are £250,000 or over. Between those figures, marginal relief applies. The effective rate climbs from 19% towards 25%. The marginal rate on profits in that band is 26.5%. This is worth knowing before deciding what to extract. The thresholds are divided between associated companies. Groups and multiple companies therefore reach 25% sooner.
Reviewed by
BSc, MLIBF, PETR, Chartered ALIBF · Co-Founder and Chartered Associate
Chris has spent over a decade in financial planning and specialises in research and technical analysis. He checks every figure and calculation on this page before it is published.
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