Tax savings calculator for limited company directors 2026/27
For a sole director in 2026/27, a £12,570 salary topped up with dividends is usually the cheapest way to take money out of a limited company: the salary is free of income tax and employee National Insurance, and it cuts corporation tax. This calculator compares that with how you pay yourself now, adds pension contributions and your spouse, and shows the yearly saving.
How much tax could you save as a director?
Answer three short steps about your company, your pay and your goals. We compare what you do now with a £12,570 salary plus dividends, using 2026/27 rates for England, Wales and Northern Ireland. Nothing you enter is stored or sent anywhere.
What the calculator compares
- 1What you do now: all salary, a small salary plus dividends, or half and half if you're not sure.
- 2Suggested mix: a salary of up to £12,570, with the rest as dividends.
- 3With your partner: the same total shared equally between two of you, if they're involved or could be.
For each option you'll see every tax line, your take-home pay and the profit left in the company.
Prefer to talk it through?
How you pay yourself affects both your company's tax and your own, so it sits across our corporation tax and personal tax services. Our guide on how to pay yourself as a director explains the thinking.
You've changed your answers since these results were worked out. Go to step 3 and choose "Show my results" to update them.
This is an estimate, not advice
Want George to check your figures?
The calculator uses standard 2026/27 rates and the assumptions above. Your own position may be different, so book a free call before you change how you pay yourself. Our free white paper sets out the options in plain English.
How does the tax savings calculator work?
It adds up every tax paid by you and your company under each option, using the same profit and the same amount taken out each time. The difference in total tax is your saving. All figures are for the 2026/27 tax year (6 April 2026 to 5 April 2027) and a 12-month company accounting period.
Which 2026/27 rates does it use?
| Tax | 2026/27 rate or threshold | Source |
|---|---|---|
| Personal Allowance | £12,570, reduced by £1 for every £2 of income over £100,000 (nil at £125,140) | GOV.UK |
| Income tax on salary (England, Wales and Northern Ireland) | 20% on the first £37,700 of taxable income, 40% up to £125,140, 45% above | GOV.UK |
| Dividend allowance | £500 tax-free | GOV.UK |
| Dividend tax (whole UK) | 10.75% basic rate, 35.75% higher rate, 39.35% additional rate | GOV.UK |
| Employee National Insurance | 8% on salary from £12,570 to £50,270, 2% above | GOV.UK |
| Employer National Insurance | 15% on salary above £5,000 | GOV.UK |
| Employment Allowance | Up to £10,500 off employer National Insurance; not available if the sole director is the only employee | GOV.UK |
| Corporation tax | 19% up to £50,000, 25% over £250,000, marginal relief in between (an effective 26.5% on that slice) | GOV.UK, HMRC |
What does it work out for each option?
- Your company: profit, less salaries, employer National Insurance and pension contributions, gives taxable profit. Corporation tax comes off that, and what's left is the most the company can pay as dividends this year.
- You: employee National Insurance and income tax on your salary, then dividend tax. Your salary uses the Personal Allowance first, and dividends sit on top of it, so they're taxed at the rate for the band they land in.
- Total tax: corporation tax, both kinds of National Insurance, income tax and dividend tax added together.
- What's left: your take-home pay and the profit left in the company. That profit has had corporation tax taken off but no personal tax yet, so compare it as well as the saving.
Worked example: £100,000 profit, £60,000 taken out
A sole director whose company makes £100,000 before their pay takes £60,000 a year, with no pension contributions and no other income.
| 2026/27 | All salary | £12,570 salary plus dividends |
|---|---|---|
| Salary / dividends | £60,000 / £0 | £12,570 / £47,430 |
| Corporation tax | £6,032.50 | £19,118.04 |
| Employer National Insurance | £8,250.00 | £1,135.50 |
| Employee National Insurance | £3,210.60 | £0.00 |
| Income tax | £11,432.00 | £0.00 |
| Dividend tax | £0.00 | £7,477.48 |
| Total tax | £28,925.10 | £27,731.02 |
| Your take-home pay | £45,357.40 | £52,522.52 |
| Profit left in the company | £25,717.50 | £19,746.46 |
The mix saves £1,194.08 of tax a year. You take home £7,165.12 more, while the company keeps £5,971.04 less, because dividends aren't deductible for corporation tax.
Why is a £12,570 salary plus dividends often the most tax-efficient?
Because a £12,570 salary costs you no income tax or employee National Insurance, and the company can deduct it from its profits. Dividends on top carry no National Insurance at all, and the first £500 is tax-free.
The salary uses your whole Personal Allowance, sits exactly at the Primary Threshold where employee National Insurance starts, and is above the £6,708 Lower Earnings Limit, so the year counts towards your State Pension (GOV.UK: National Insurance rates).
What about employer National Insurance?
If you're the only employee, your company can't claim the Employment Allowance, so it pays 15% on salary above £5,000: £1,135.50 on £12,570. It's usually still worth it. The £7,570 of salary above £5,000 and the National Insurance on it are deductible, saving £1,654.05 of corporation tax at 19%, and more at higher rates. Taken as dividends instead, that £7,570 would be tax-free inside your Personal Allowance, so the full salary cuts total tax by about £519. If the company can claim the allowance, a higher salary can cost less, and the calculator allows for that. We can set up and run your director-only payroll.
When does salary beat dividends?
Only when the extra salary is itself taxed at the higher rate, which means your salary is already over £50,270, and your company's profits are over £50,000. From 6 April 2026, dividends in the higher rate band are taxed at 35.75% (GOV.UK: tax on dividends), so for a director paid mainly through the payroll, more salary or a bonus can now leave slightly more than a dividend. On the usual £12,570 salary plus dividends, dividends still come out ahead.
| £1,000 of company profit paid as | Basic rate band | Higher rate band |
|---|---|---|
| Extra salary or bonus, when your salary already reaches that band (no Employment Allowance) | £626 | £504 |
| Bonus on top of a £12,570 salary plus dividends (no Employment Allowance) | £626 | £409 |
| Dividend, company paying 19% | £723 | £520 |
| Dividend, company in the marginal relief band (26.5%) | £656 | £472 |
| Dividend, company paying 25% | £669 | £482 |
Figures are what you keep after all taxes, above your Personal Allowance and £500 dividend allowance, at England, Wales and Northern Ireland rates, rounded to the nearest pound. A bonus on top of a £12,570 salary pays 8% employee National Insurance rather than 2%, and it moves the same amount of your dividends from the 10.75% rate into the 35.75% rate, which is why it keeps only £409.
Where do pension contributions fit in?
Company pension contributions are often the cheapest way to reward yourself. They're usually deductible for the company and aren't taxed as your earnings (HMRC Pensions Tax Manual), and they carry no National Insurance (GOV.UK). They count towards your annual allowance of £60,000 for 2026/27.
Dividends can only come from profits: a company must not pay out more in dividends than its available profits, and each one needs a board minute and a dividend voucher. Our guide on how to pay yourself as a director goes further, and our corporation tax service can help you set it up. For single figures, try our dividend tax calculator or corporation tax calculator.
What doesn't the calculator cover?
It's built for a typical owner-managed company with one or two people taking money out. These situations change the answer, so talk to us if any apply.
Scottish taxpayers
Scotland has its own income tax bands for salary, from 19% to 48%. Dividends are taxed at the UK rates, so only the salary lines would change.
Other income
Rent, savings interest, a pension or another job use up your allowance and bands first, pushing dividends into higher rates. Income over £60,000 can also bring in the High Income Child Benefit Charge.
Student loans
Repayments aren't included. On Plan 2, for example, they're 9% of earnings above £29,385 in 2026/27 (GOV.UK).
Associated companies
If you control other companies, the £50,000 and £250,000 corporation tax limits are shared between them. They're also reduced for an accounting period shorter than 12 months.
IR35
If you're a contractor and the off-payroll working rules apply to a contract, you pay broadly the same tax and National Insurance as an employee on that income, so this comparison doesn't hold.
Past profits, expenses and loans
We assume dividends come only from this year's profit, and we leave out expenses, benefits in kind and director's loans. Our take-home pay calculator covers salary on its own.
Free white paper
How do I pay myself? 2026/27
The usual starting point for a director's pay, when a pension beats more dividends, the £100,000 trap and the dividend paperwork, all at 2026/27 rates. Free to download.
Frequently asked questions
Can I pay my spouse a salary and dividends to save tax?
Yes, if it is genuine. A salary must be a reasonable rate for work your spouse or partner actually does, or HMRC can refuse the corporation tax deduction. For dividends, they need to own their shares outright: ordinary shares with full rights, not shares that only carry income. Otherwise the settlements rules can tax the dividends on you. The spouse exemption from those rules only applies to married couples and civil partners.
Are company pension contributions a tax-efficient way to pay myself?
Often, yes. Contributions your company pays into a registered pension scheme are usually deductible for corporation tax, are not taxed as your earnings and carry no National Insurance. They count towards your annual allowance, which is £60,000 for 2026/27, and unused allowance from the previous three tax years can be carried forward if you were a member of a registered pension scheme in those years. The allowance is lower for very high earners, and a £10,000 limit applies to money purchase savings once you have started taking money flexibly from a pension.
Thinking of bringing your partner into the business? Read our guide to paying your spouse and children, or see all our free tools.
Written and reviewed by George Nicholson BFP ACA, ICAEW Chartered Accountant. Last reviewed 20 October 2026. This page is general information, not personal advice.
Want your pay set up the right way?
Book a free call to talk through your salary, dividends and pension contributions with George, a Chartered Accountant who works with directors across the UK.