Free tax tool — updated for 2026/27
Salary & Dividend Calculator UK 2026/27
Most limited company directors pay themselves a combination of salary and dividends to minimise their overall tax bill. But the optimal split is not always what you think — it depends on your company's profit level, whether you qualify for the Employment Allowance, and whether you need to demonstrate salary income for mortgage applications or pension entitlement.
This calculator uses the latest 2026/27 tax rates, National Insurance thresholds, corporation tax bands and dividend allowances to show you exactly how much you keep under different salary and dividend combinations.
How to use: Enter your company's annual profit before your salary is deducted, select whether you have the Employment Allowance, and the calculator will show the most tax-efficient split — with a full breakdown of every tax you pay.
Understanding your results
The calculator compares scenarios so you can see the impact of different salary levels on your total tax bill. For most single-director limited companies in 2026/27, the optimal salary is £12,570 per year. This figure uses your full personal allowance while keeping employer's National Insurance contributions to zero on the salary element.
A higher salary is not always worse, though. If your company qualifies for the Employment Allowance (available to companies with at least one employee alongside the director), you can offset up to £10,500 of employer's NIC — which can make a higher salary more tax-efficient than the standard £12,570 approach.
Remember: dividends can only be paid from retained profits. If your company does not have sufficient distributable reserves after corporation tax and your salary, you cannot legally declare a dividend — regardless of what is in the bank account.
Frequently asked questions
What is the most tax-efficient salary for a company director in 2026/27?
For most single-director limited companies without the Employment Allowance, £12,570 per year (£1,048 per month). This uses your full personal allowance and avoids triggering employer's NIC. The remainder of your profit — after corporation tax — should normally be taken as dividends.
Do I need to register for PAYE to pay myself a salary?
Yes. Even if you are the only director, you must register your company as an employer with HMRC and run payroll each month or quarter. Accounting software such as Xero and QuickBooks includes payroll functionality, or your accountant can run it for you.
How are dividends taxed differently from salary in 2026/27?
Salary is taxed at income tax rates (20%, 40%, 45%) and attracts employee's NIC at 8% or 2%, plus employer's NIC at 15%. Dividends are paid from profits that have already been subject to corporation tax, and are then taxed at lower personal rates: 10.75% (basic rate), 35.75% (higher rate) and 39.35% (additional rate) in 2026/27. You also receive a £500 tax-free dividend allowance. Note that dividend rates increased by 2 percentage points from April 2026 compared to the previous year. This difference in rates is why the salary-plus-dividend structure is more tax-efficient than salary alone.
Should I take a higher salary if I am applying for a mortgage?
Possibly. Some mortgage lenders weight salary income more heavily than dividend income when assessing affordability. If you are planning a mortgage application in the next 12 months, it may be worth increasing your salary temporarily — even though this increases your NIC bill — to improve your borrowing capacity. Your accountant can model the trade-off for your specific situation.
Does this calculator account for student loan repayments?
Student loan repayments are collected through PAYE on salary only — not on dividend income. If you have an outstanding student loan, a lower salary (with more taken as dividends) will reduce your repayments. This is a legal and well-known planning point, not avoidance.
Related tools
Want personalised advice on your salary and dividend strategy?
With dividend rates rising in 2026/27, the optimal split may have changed from last year. Book a free 15-minute discovery call and we will look at your specific numbers — no obligation, no sales pitch.
Book a free discovery call →This calculator is provided by Grosvenor.Solutions, AI-powered chartered accountants for UK businesses. All calculations use HMRC rates and thresholds for the 2026/27 tax year. This tool is for guidance only and does not constitute tax advice.