UK Dividend Tax Calculator — Director's Salary & Dividends
Free UK take-home pay calculator for Limited Company directors. Enter your annual director's salary and dividends to estimate take-home pay after Income Tax, Class 1 National Insurance and Dividend Tax, with automatic Dividend Allowance handling.
How UK Dividend Tax works
Many people who run their own UK Limited Company take money out of the business in two different ways: a director's salary, and dividends paid out of the company's profits. Dividends are taxed under a completely separate system from salary. The first £500 of dividend income each year is tax-free (the Dividend Allowance), and anything above that is taxed at 8.75%, 33.75% or 39.35% depending on how much other income you have.
The key difference from salary is that dividends are never subject to National Insurance. Because of this, many director-shareholders pay themselves a modest salary — often set close to the Personal Allowance — and take the rest of their income as dividends, which reduces the combined National Insurance and Income Tax bill compared to taking the same amount entirely as salary.
How to use this calculator
- Enter your annual director's salary The salary you pay yourself through PAYE as an employee of your own company.
- Enter your annual dividend The amount you plan to take out of the company as dividends this tax year.
- Choose your tax region Select Scotland if you are taxed under Scottish Income Tax rates on your salary (this does not change your Dividend Tax).
- Check your result The Personal Allowance and Dividend Allowance are applied automatically to show your take-home pay after Income Tax, National Insurance and Dividend Tax.
Tips for getting more out of it
- Keeping your director's salary around the Personal Allowance (£12,570) means you pay little to no Income Tax on the salary itself, minimal National Insurance, while still building up qualifying years for the State Pension.
- Because the Personal Allowance is applied to salary first, if your salary is below the Personal Allowance, the unused portion carries over and reduces your taxable dividend as well.
- If your combined salary and dividend income exceeds £100,000, the Personal Allowance starts to taper away, so increasing your dividends too far can unexpectedly push your effective tax rate higher.
- The £500 Dividend Allowance does not carry over to future years — if you can time when you take dividends, using this allowance every year is generally more tax-efficient than skipping a year.
- This calculator only estimates personal Income Tax and National Insurance. Speak to an accountant about your company's Corporation Tax and distributable profit before declaring a dividend.
Dividend Tax & director's pay glossary
- Scottish Income Tax
- The set of Income Tax bands set independently by the Scottish Parliament (six bands: 19%/20%/21%/42%/45%/48%). It only applies to non-dividend income such as salary and does not affect the Dividend Tax bands.
- Director's salary
- Pay a company director receives from their own company under a normal employment contract, taxed through PAYE with Income Tax and National Insurance applied in the usual way.
- Dividend
- A payment made to shareholders out of a company's profit after Corporation Tax (its "distributable profit"). A director who also owns shares in their company can take dividends in addition to, or instead of, a salary.
- Dividend Allowance
- The amount of dividend income that is tax-free each year (£500 for 2026/27). It is separate from the Personal Allowance and only applies to dividend income.
- Taxable dividend
- The portion of your dividend income that is actually taxed at dividend rates (8.75%/33.75%/39.35%), after both the Personal Allowance and the Dividend Allowance have been used up.
- Personal Allowance
- The amount of income everyone can normally earn tax-free in the UK (£12,570 for 2026/27). It is reduced by £1 for every £2 of combined salary and dividend income above £100,000, reaching zero at £125,140.
- Class 1 National Insurance
- National Insurance charged on employment income such as a director's salary — 8% between the Primary Threshold (£12,570) and the Upper Earnings Limit (£50,270), and 2% above that. It is never charged on dividends.
Frequently asked questions
Side Note — Why is "low salary plus dividends" such a common UK tax strategy?
For anyone running their own UK Limited Company, how you choose to extract money from the business — as a director's salary or as dividends — makes a big difference to your overall tax bill. Salary is taxed through PAYE and attracts National Insurance from both employer and employee, while dividends attract no National Insurance at all. Because of this, many one-person company directors set their salary at a level just high enough to keep building State Pension entitlement, and take the rest of their income as dividends instead.
There is a catch, though. A company can only legally pay dividends out of distributable profit — profit that remains after Corporation Tax has already been paid. If a company pays a dividend without enough distributable profit, it can be treated as an "unlawful dividend" and may need to be repaid. Looking at the whole picture, the company's profits are effectively taxed twice — once through Corporation Tax, and again through Dividend Tax when the shareholder receives the money — something a simple comparison of Income Tax rates alone doesn't show.
Over the past several years, the UK government has steadily narrowed the tax gap between salary and dividends. The Dividend Allowance has been cut in stages from £5,000 in 2017/18 down to just £500 from 2024/25 onward. This has generally been framed as an effort to make the tax treatment of employment income more consistent with income from running your own business.