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UK · 2025/26

Dividend vs Salary Calculator

Calculate the most tax-efficient salary and dividend split for limited company directors.

Last reviewed: 7 November 2025Source: HMRC — Running a business
Dividend vs Salary Calculator · UKBusiness & Freelance

Dividend Pool

£53,311.05

Take-Home

£57,482.32

Total Tax

£22,517.68

Rates & sources

UK company rates (Corporation Tax, VAT, payroll NI) as published by HMRC and Companies House.

Source: HMRC — Running a business — figures refreshed at the start of each tax year.

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Full 2025/26 tax summary as a PDF

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When to use this calculator

  • Before pricing a job, setting margin targets, or reviewing hiring costs.
  • When you want to test sensitivity around volume, VAT, markup, or overhead changes.
  • When you need a practical estimate before committing to a budget or proposal.
  • When you are modelling break-even volume and want to see how it shifts as overheads or prices change.
  • When you are preparing a quote and need to verify that the margin holds after materials, labour, and VAT are accounted for.

Worked example: £80k profit, £12,570 salary, dividends from rest

Use these sample inputs as a quick scenario test, then change one variable at a time to compare outcomes.

Profit

£80,000

Less salary (£12,570)

£67,430

Corp Tax (Marginal Relief)

£14,119

Dividend pool

£53,312

Personal tax on salary (covered by PA)

£0

Salary NI (below threshold)

£0

Dividend tax (basic + higher band)

£3,981

Director take-home

£61,901

Total tax (CT + dividend)

£18,100

Effective combined tax rate ~22.6% — significantly less than full PAYE on the same gross. Higher salaries trigger NI which is the main reason the structure works.

How to read your results

Dividend Pool

Use this metric to compare scenarios side by side and understand how changes in the key inputs drive the final outcome. If the figure surprises you, isolate one variable at a time and rerun the calculation to identify which assumption is responsible.

Take-Home

Use this metric to compare scenarios side by side and understand how changes in the key inputs drive the final outcome. If the figure surprises you, isolate one variable at a time and rerun the calculation to identify which assumption is responsible.

Total Tax

Review this figure alongside your gross income so you can understand the true cost of deductions and plan around any thresholds before the tax year closes. If the figure looks higher than expected, check whether any pension or gift-aid contributions could reduce your taxable income.

Method & assumptionsAuthoritative sources

This calculator compares the net take-home income from two common extraction strategies: a salary-only approach and a mixed salary-plus-dividends approach. For the salary scenario it deducts income tax and employee National Insurance at current bands, plus employer National Insurance at 13.8%, with the employer NI cost reflected in the total company outlay. For the dividend scenario it first applies corporation tax to company profits, then calculates dividend tax on the extracted amount after the dividend allowance.

The comparison assumes you are a sole director-shareholder with no other income sources. It does not account for personal pension contributions, the Employment Allowance (which may offset employer NI for eligible companies), or devolved income tax rates in Scotland. Treat results as a guide and confirm with an accountant.

Common mistakes

  • !Using optimistic assumptions without testing a more cautious scenario as well.
  • !Comparing outputs from different tools without checking that the inputs match.
  • !Treating the result as a final quote instead of a planning estimate.
  • !Forgetting to include employer National Insurance contributions when modelling the true cost of a new hire.
  • !Using revenue figures in place of gross profit when calculating margin percentage, which produces a misleadingly high result.

What to do next

  • Try at least one more scenario with a lower price or higher cost so you can see the margin floor.
  • Use the related calculators below to cross-check VAT, payroll, or break-even figures from another angle.
  • Open one of the linked guides if you need more context before you finalise a quote or budget.
  • If the margin is tighter than expected, identify which single input has the biggest impact and focus any negotiation there first.
  • Keep a record of the assumptions behind this estimate so you can revisit and update it when costs or volumes change.

Frequently asked

For 2025/26, most accountants recommend a salary of £12,570 (personal allowance) — the employer NI secondary threshold fell to £5,000 in April 2025, so there's no 'safe' salary zero-NI band anymore. The Employment Allowance (£10,500) can offset the employer NI bill if the company has another employee.

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