Salary vs Dividends Calculator
For a director-shareholder taking everything out of the company. Enter the profit available before your own pay, and see what different salary levels leave in your pocket.
- Salary
- £0
- Employer NI on salary
- £0
- Profit after salary and employer NI
- £0
- Corporation Tax
- £0
- Dividends available
- £0
- Income Tax on salary
- £0
- Employee NI
- £0
- Dividend Tax
- £0
- Total tax and NI
- £0
- In your pocket
- £0
- Overall tax rate on the profit
- 0%
Assumes all remaining profit is taken as dividends, you have no other income, and the company has no associated companies.
The same profit at three salary levels
This is the comparison that matters. Same company, same profit, three different salary choices.
| Salary | Dividends | Total tax & NI | In your pocket |
|---|
Why a small salary usually wins
Salary is deductible against Corporation Tax. Dividends are not — they come out of profit that has already been taxed. That pushes in favour of salary.
But salary attracts employer National Insurance at 15% above £5,000, and employee National Insurance at 8% above £12,570. Dividends attract neither. That pushes back the other way.
The answer is usually a small salary plus dividends — but which small salary depends on whether your company can claim the Employment Allowance.
The Employment Allowance question
The Employment Allowance lets eligible employers reduce their employer NI bill by up to £10,500. It changes the answer completely — but a company whose only employee is a single director cannot claim it.
So for a one-person company, employer NI is a real cost from £5,000 upwards, and the £5,000 salary often wins. For a company with at least one other employee earning above the secondary threshold, the allowance usually covers the employer NI entirely, and the £12,570 salary usually wins because it uses the Personal Allowance without the NI cost.
This calculator does not apply the Employment Allowance. If your company can claim it, the employer NI line above will overstate your cost, and a higher salary will look worse than it really is. It is exactly the kind of detail worth a conversation.
What this ignores
A real profit extraction plan also considers pension contributions, which are deductible for the company and not taxed as income; other personal income such as rent or a spouse’s salary; whether your spouse is a shareholder; student loan repayments; the High Income Child Benefit Charge; and whether you need the cash at all this year, since leaving profit in the company defers personal tax entirely.
Dividends can also only be paid from distributable reserves, properly documented. A dividend voted without sufficient profits is not a dividend — it is a director’s loan, with its own tax charge.
The efficient split depends on your wider circumstances, and the difference between a reasonable answer and the right one is usually worth more than the fee.
Speak to us before the tax year ends, not after.
Rates correct for the 2026/27 tax year and financial year 2026. Next review April 2027.
This calculator gives a general estimate for a straightforward single-shareholder company and is not a substitute for advice on your own circumstances. It assumes the Employment Allowance is not claimed, no associated companies, a 12-month accounting period, no other personal income and that all available profit is distributed.