Director Dividend Tax Calculator 2026/27

Worked examples: a £12,570 salary plus dividends

Many owner-directors take a salary equal to the Personal Allowance and the rest of their pay as dividends. These examples show the personal dividend tax at four dividend levels. They do not include Corporation Tax, which the company pays on its profits before any dividend is declared.

2026/27 rates. Personal dividend tax only. The company has already paid Corporation Tax, at 19% to 25%, on the profits these dividends are paid from.

With the Personal Allowance used by salary, the first £37,700 of dividends stays within the basic-rate band: £500 tax-free, the rest at 10.75%. That is why £37,700 is a common dividend figure for directors who want to avoid the higher rate.

Above that, each extra £1,000 of dividends costs £357.50 in tax. Pension contributions made by the company, or spreading dividends across tax years, are the usual ways directors manage this.

Things this calculation leaves out

• Corporation Tax: 19% on profits up to £50,000 and 25% above £250,000, with marginal relief in between. Dividends can only be paid from post-tax profits.
• Employer National Insurance on the salary: 15% above the £5,000 secondary threshold, £1,135.50 on a £12,570 salary. The Employment Allowance cannot be used where the director is the only employee.
• Student loan repayments, which count dividend income over £2,000 for Self Assessment filers.

From company profit to money in your account

This calculator works out the personal tax on dividends you pay yourself. It sits at the end of a longer chain. The company pays your salary and employer National Insurance, which are deductible, then pays Corporation Tax on what is left, and only post-tax profit can be paid out as a dividend. Corporation Tax is 19% on profits up to £50,000 and 25% above £250,000, with marginal relief in between, for a company with no associated companies.

A £12,570 salary uses your Personal Allowance, so the dividends start in the basic-rate band: £500 at 0%, then 10.75% until your total income reaches £50,270, and 35.75% above that. If you are the only employee and a director, the company cannot claim the Employment Allowance, so employer National Insurance of 15% applies to salary above £5,000 a year.

A dividend is only lawful if the company has enough distributable profits (accumulated realised profits, less realised losses) to cover it when it is paid. Record each dividend with a board minute and give each shareholder a dividend voucher. Dividends must be paid in proportion to shareholdings within a class of shares.

Two profit levels, worked through to what you keep

2026/27. One director-shareholder, no other income, all post-tax profit paid out in the same tax year. At £100,000 the taxable profit is above £50,000, so marginal relief applies.

Timing: one year or two

Taking £60,000 of dividends on top of a £12,570 salary in one tax year costs £11,971.25 in dividend tax. Paying £30,000 in each of two tax years instead, with the same salary in both and if the company's profits allow, costs £6,342.50 over the two years, because every pound stays in the basic-rate band. The saving of £5,628.75 comes from using two years of basic-rate band instead of one.

Every figure here is worked out by the same code as the calculator, using 2026/27 rates unless another year is named. Estimates for planning, not tax advice.

Things directors get caught by

• Paying a dividend from a bank balance rather than from profits. Cash in the account may be VAT or Corporation Tax not yet paid. A dividend paid without enough distributable profits is unlawful, and a shareholder who knew, or had reasonable grounds to believe, that it was unlawful must repay it.
• Treating drawings as dividends after the event. Money taken without a declared dividend goes to your director's loan account, which has its own tax rules if it is overdrawn at the year end.
• Forgetting the date a dividend is taxed. Interim dividends are taxed when paid; a final dividend is taxed when it becomes due, usually the date it is approved, unless a later payment date is set.
• Leaving out other income. Rent, savings interest or a second job sit underneath the dividends and can move them into the higher rate. Enter them as other income.