Director salary and dividend calculator
Income minus costs, before your salary and employer National Insurance.
Assumes a single director company with no other employees (so no Employment Allowance), all post-tax profit paid out as dividends, and no other income. It leaves out employer pension contributions, retained profit, accountancy fees and limited liability, which can all change the answer. Scottish rates are not modelled.
- Employer National Insurance£1,135.50
- Corporation Tax£13,818.04
- Dividends paid£52,476.46
- Income tax (salary and dividends)£9,281.58
- Employee National Insurance£0.00
- Total tax and NIC£24,235.12
- Same profit as a sole trader£57,711 take-home
- Limited company versus sole trader-£1,947
Take-home as a limited company director
£55,765
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How does the director salary and dividend calculator work?
A limited company director typically takes a modest salary and the rest of the profit as dividends, because dividends are not subject to National Insurance. On £60,000 profit with a £12,570 salary, take-home is about £46,091 as a limited company director and about £46,111 as a sole trader, so the difference is small. The gap changes with profit level, pension contributions and how much profit you leave in the company.
How it works
The three taxes involved
The company pays employer National Insurance on salary above £5,000 and Corporation Tax on profit after salary. You then pay income tax and employee National Insurance on salary, and dividend tax on dividends above the £500 allowance.
Dividend tax rates
From April 2026 the ordinary dividend rate is 10.75%, the upper rate 35.75% and the additional rate 39.35%. Dividends use up your basic rate band after your salary and other income.
Why the salary level matters
A salary at or above the lower earnings limit (around £6,500) protects State Pension credits. Salaries above £5,000 cost the company employer National Insurance at 15%, and a one-director company cannot claim the Employment Allowance.
Rates used, 2026/27
- Employer NI15% above £5,000
- Dividend allowance£500
- Ordinary dividend rate10.75%
- Upper dividend rate35.75%
- Additional dividend rate39.35%
Last checked November 2026 against GOV.UK: Tax on dividends. General information, not tax advice.
A worked example
With £60,000 profit and a £12,570 salary, the company pays £1,135.50 employer NI and £8,795.96 Corporation Tax, leaving £37,498.54 for dividends. After £3,977.34 income tax your take-home is £46,091.20, close to the £46,111.40 a sole trader would keep. A limited company tends to pull ahead when you retain profit, make employer pension contributions or have higher profits taxed at lower effective rates inside the company.
Questions about this calculator
Is a limited company always better than sole trader?
No. If you pay all the profit out, the take-home difference is now small, and the extra accountancy cost and admin of a company can outweigh it. A company tends to help when you retain profit, make employer pension contributions, or want limited liability. The comparison changes with each year's rates.
Can I pay dividends if the company has no profit?
Dividends can only be paid from available post-tax profits. Paying them unlawfully can make them repayable and create director's loan account problems.
What about director's loan accounts?
If you take money out beyond salary, dividends and expenses, it goes through your director's loan account, and an overdrawn balance at year-end can trigger a 33.75% s455 charge.
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