Salary & dividend calculator.
For limited company directors weighing up how to extract money from the company. Enter a total amount and see how salary-only, dividends-only and a common small-salary-plus-dividends split compare. This is an estimate for general guidance only, not personalised tax advice — talk to Buzz for advice specific to your situation.
Enter the amount to extract
Enter an amount, then click Calculate to compare salary/dividend splits.
Rates used in this calculator (2026/27 tax year)
| Income Tax band | Rate |
|---|---|
| Up to £12,570 (personal allowance) | 0% |
| £12,571 – £50,270 | 20% |
| £50,271 – £125,140 | 40% |
| Over £125,140 | 45% |
| Employee National Insurance (Class 1) | Rate |
|---|---|
| Up to £12,570 | 0% |
| £12,571 – £50,270 | 8% |
| Over £50,270 | 2% |
| Dividend tax | Rate |
|---|---|
| Dividend allowance | £500 tax-free |
| Basic rate | 10.75% |
| Higher rate | 35.75% |
| Additional rate | 39.35% |
Source: gov.uk Income Tax rates, National Insurance rates and Tax on dividends pages, checked July 2026.
What the three scenarios are actually comparing
All salary. The whole amount is taxed as employment income — Income Tax at 20%, 40% and 45% in bands, plus employee National Insurance at 8% between £12,570 and £50,270 and 2% above.
All dividends. No National Insurance is due on dividends. The first £500 above your personal allowance is covered by the dividend allowance, then dividend rates apply: 10.75%, 35.75% and 39.35% depending on which band the money falls into.
Small salary plus dividends. A salary of £12,570 — which uses the personal allowance without triggering employee National Insurance — with the balance taken as dividends.
The ordering matters. Salary is taxed first and uses up your personal allowance and basic-rate band. Dividends stack on top, which is why the same amount of dividend can be taxed at two different rates in the same year. The calculator follows HMRC's ordering rules.
Taking £60,000 out of the company
- All salary — Income Tax £11,432 and NI £3,211£45,357 take-home
- £12,570 salary plus £47,430 of dividends — total tax £7,477£52,523 take-home
- Difference£7,166
Why the gap exists. Almost all of it is National Insurance — £3,211 of employee NI on the salary route, none on dividends — plus the lower dividend rates. It is not a loophole; it is the trade-off for dividends being paid out of profit that has already borne Corporation Tax.
And here is what this calculator can't show you. It looks only at personal tax on the money you extract. Salary is a deductible expense for the company, so it reduces Corporation Tax; dividends are not, so they do not. That is why "all dividends" and "small salary plus dividends" come out level here on personal tax alone, while in practice the small salary usually wins once the company's position is included. Working against that, salary above the secondary threshold triggers employer's National Insurance, and single-director companies generally cannot claim the Employment Allowance to cover it. The right answer is a calculation across both the company and you — that is the conversation to have.
Before you act on it
- Check the company can legally pay the dividend. Dividends can only be paid out of distributable reserves — accumulated post-tax profit, not the bank balance. Paying one when the reserves are not there makes it an illegal dividend, usually reclassified as a director's loan with a tax charge attached.
- Do the paperwork. A board minute and a dividend voucher for each dividend. It takes minutes and it is the first thing asked for if HMRC looks.
- Watch the £100,000 line. Above it the personal allowance tapers at £1 for every £2, creating an effective 60% band up to £125,140. Timing an extraction either side of a tax year can be worth real money.
- Don't ignore the pension route. An employer pension contribution is a deductible company cost, so it avoids the double layer entirely. Whether it suits you is a regulated advice question — the tax mechanics are on our financial services page.
Common questions about salary and dividends
Why is a small salary plus dividends usually recommended?
Because it uses two different tax treatments efficiently. A salary around the personal allowance is deductible for the company, protects your National Insurance record and attracts little or no personal tax; dividends carry no National Insurance at all. The combination is normally efficient — but "normally" is doing real work in that sentence. The right split depends on your company's profit, whether the Employment Allowance is available, your other income, and whether you need to show declared income for a mortgage. Take the output here as a comparison, not a recommendation.
Can I pay a dividend whenever I like?
Only out of distributable reserves — accumulated profit after Corporation Tax. Cash in the bank is not the same thing, because it may include VAT you have collected, PAYE you owe and Corporation Tax not yet paid. A dividend paid without sufficient reserves is unlawful and is normally reclassified as a director's loan, with the section 455 charge and benefit-in-kind consequences that follow. The paperwork matters too: a board minute and a dividend voucher for each payment, dated when the dividend was declared, not written up retrospectively in January.
Do dividends count for a mortgage?
Yes, though lenders assess them differently and most want one to three years of accounts or SA302 tax calculations. Some use salary plus dividends actually drawn; a smaller number will consider your share of retained profit, which usually gives a much better result for an owner who leaves money in the business. This is the trap in aggressive profit extraction planning: minimising declared income for three years works beautifully until you meet a lender who counts only declared income. If a mortgage is coming, plan the extraction strategy around it rather than the reverse.
Does taking a small salary hurt my State Pension?
Not if the salary is at or above the level that gives you a qualifying year for National Insurance purposes — a salary set at the personal allowance is comfortably above it, and you accrue the qualifying year without actually paying contributions. The risk lies in taking no salary at all and living entirely on dividends, because dividends build no National Insurance record whatsoever. You need 35 qualifying years for the full new State Pension and at least 10 to get any. Check your record on the HMRC app before assuming it is fine.
What about a director's loan instead?
It is borrowing, not extraction, and it has teeth. An overdrawn loan account not repaid within nine months and one day of the year end triggers a section 455 charge on the company at 33.75% of the outstanding balance — refundable, but only once the loan is cleared, which can be years later. A balance over £10,000 that is interest-free also creates a benefit in kind reportable on a P11D. Used deliberately and cleared on time it is a legitimate timing tool. Used as a substitute for a salary the company cannot afford, it accumulates into a problem. See directors' loan accounts explained.
What is this calculator not accounting for?
Several things that change the answer materially. It compares personal tax on the amount extracted only: it assumes this is your only income, ignores the Corporation Tax already paid on the profits funding a dividend, and takes no account of pension contributions, the Employment Allowance, student loan repayments, the personal allowance taper above £100,000, or any other income you receive. It also assumes the company has the reserves. For a real answer you need your actual figures and the company position alongside them, which is a conversation rather than a calculation.
