Dividend Tax Calculator for Company Directors 2026/27

Use the dividend tax calculator

Enter your director salary and dividend amount to get a full breakdown by tax band, 10.75%, 35.75% and 39.35%.

How the director salary-plus-dividend structure works

Most sole directors take a low salary — typically £5,000 or £12,570 — and draw the rest as dividends from post-corporation-tax profits. The salary is deductible as a business expense, which reduces the company's corporation tax bill. Dividends come out of profits after corporation tax has already been paid.

Dividends attract no National Insurance. Not employer NI, not employee NI. That is the main advantage. But dividend tax rates of 10.75%, 35.75% and 39.35% still apply on the personal side, so these need to go into the calculation alongside corporation tax.

2026/27 rates and thresholds for directors

Employer NI secondary threshold (from April 2026): approximately £5,000. Employer NI rate: 15%.

Worked example: £12,570 salary + £40,000 dividends

A director takes a salary of £12,570 and dividends of £40,000 in 2026/27. Total income: £52,570.

• Salary of £12,570 is within the Personal Allowance (£12,570), no income tax on salary.
• Employee NI: nil (salary at the primary threshold).
• Employer NI: approximately £1,136 (15% on £12,570 − £5,000 = £7,570), covered by the £10,500 Employment Allowance where eligible, otherwise corporation-tax deductible.
• Remaining Personal Allowance for dividends: £12,570 − £12,570 = £0 (fully used by salary).
• First £500 of dividends: dividend allowance, £0 tax.
• Taxable dividends: £40,000 − £500 = £39,500.
• Basic-rate band available: £50,270 − £12,570 = £37,700. The £500 allowance uses £500 of it, so £37,200 falls within basic rate and the remaining £2,300 in the higher-rate band.
• Dividend tax: £37,200 × 10.75% = £3,999, plus £2,300 × 35.75% = £822.
• Total personal tax: approximately £4,821 (on £52,570 of income).

This is personal dividend tax only. Corporation tax on company profits is separate.

When higher-rate dividend tax kicks in for directors

With a £5,000 salary, the 35.75% rate kicks in when dividends push total income above £50,270. Dividends above approximately £45,270 (£50,270 − £5,000) cross that line.

With a £12,570 salary, dividends above approximately £37,700 hit the higher rate. Keep dividends below these levels and everything falls at 10.75%. That is the key number to plan around.

Optimal director salary: £12,570 (or a lower NI-free level)

• £12,570 (optimal for most): Uses the full Personal Allowance. No income tax on salary. Employer NI of approximately £1,136 (15% on £7,570) is payable, but is covered by the £10,500 Employment Allowance where the company qualifies, or is deductible for corporation tax (net cost at 25% rate approximately £852) and outweighed by the CT saving on the larger salary deduction.
• £5,000: No employer NI, no employee NI, no income tax. Company saves corporation tax on the salary. A common choice for single-director companies wanting minimal payroll. Raise to £6,708 (the lower earnings limit) to accrue a qualifying State Pension year.
• Above £12,570: Employee NI at 8% becomes payable and the case for higher salary weakens rapidly. Most directors cap salary here.

Self Assessment for director dividend income

Directors receiving dividends must file a Self Assessment return every year. HMRC has no way to collect dividend tax through PAYE. The deadline for 2026/27 is 31 January 2028 — both for filing and for payment. Interest runs on anything paid late.

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