Take-home · 2026/27

Dividend tax calculator 2026/27

Salary and dividends are taxed differently and stack on top of each other. Enter both to see your income tax, National Insurance, dividend tax and real take-home — with the bands applied in the right order.

Your income
What you draw from the company in 2026/27.

Take-home after all tax

£54,173.75

13.4% of £62,570.00 lost to personal tax.

Income tax on salary
£0.00
Employee National Insurance
£0.00
Dividend tax
£8,396.25
Total personal tax
£8,396.25

Why salary and dividends differ

Salary is earnings: it carries income tax and National Insurance, but the company gets Corporation Tax relief on it. Dividends carry no National Insurance, are taxed at lower headline rates, but are paid out of profit the company has already paid Corporation Tax on. That trade-off is the whole game.

  • £500 dividend allowance — the first £500 of dividends is tax-free each year.
  • 10.75% / 35.75% / 39.35% — dividend rates in the basic, higher and additional bands for 2026/27.
  • Stacked on top — dividends are taxed in whichever band sits above your salary, not from zero.

The tax-efficient salary

£12,570 is the usual sweet spot for a sole director

A salary at the £12,570 personal allowance uses your tax-free band, triggers no employee National Insurance, and is deductible against Corporation Tax — then the rest comes out as dividends, which dodge NI entirely. Companies with other employees can claim the Employment Allowance and sometimes go higher; a sole director usually can't.

Above the allowance, extra salary saves Corporation Tax but costs employer National Insurance (15% over a £5,000 threshold) and employee NI, so most one-person companies stop salary at £12,570 and take the rest as dividends. Your own answer depends on your profit level and whether the company has other staff.

Common questions

How is dividend tax worked out?

Dividends sit on top of your other income, so the rate depends on what's beneath them. After a £500 tax-free allowance, dividends are taxed at 10.75% within the basic-rate band, 35.75% in the higher-rate band and 39.35% in the additional-rate band — using up whatever band your salary hasn't. The basic and higher rates each rose 2 points from 6 April 2026.

What's the most tax-efficient director's salary?

For a sole director with no other employees, a salary of £12,570 (the personal allowance) is usually the most tax-efficient in 2026/27: it uses your allowance, triggers no employee National Insurance, and is deductible against Corporation Tax. The rest of your income is then taken as dividends, which carry no NI.

Do I pay National Insurance on dividends?

No — dividends aren't earnings, so there's no National Insurance on them. That's the core of why a low salary plus dividends is efficient. Your company does pay Corporation Tax on the profits before they're distributed, though, so dividends aren't 'free'.

General information for the 2026/27 tax year, assuming no other income, pension contributions, student loan or Scottish rates. Not tax advice.