Dividend vs salary calculator UK 2026/27

Dividend vs salary UK — frequently asked questions

What is the most tax-efficient salary for a director in 2026/27?

Most directors set their salary at the Secondary NI threshold (£5,000) or the Primary NI threshold (£12,570). Salary at £12,570 uses the full personal allowance tax-free, but triggers employee NI above £12,570. Salary at £5,000 avoids employer NI (unless you have Employment Allowance) and employee NI. The optimal level depends on whether your company claims Employment Allowance.

What is the dividend allowance in 2026/27?

The dividend allowance is £500 in 2026/27 (reduced from £1,000 in 2023/24 and £2,000 previously). The first £500 of dividend income is tax-free each year. Above that, dividends are taxed at 10.75% (basic rate), 35.75% (higher rate) or 39.35% (additional rate), depending on your total income. The basic and higher rates each rose by 2 percentage points on 6 April 2026.

Do dividends attract National Insurance?

No. Dividends are not subject to National Insurance — either employee's or employer's NI. This is one of the key tax advantages of taking income as dividends rather than salary above the NI threshold.

How does Corporation Tax affect the comparison?

The salary and dividend calculator above shows personal tax only. Remember that salaries are a deductible business expense (reducing Corporation Tax), while dividends are paid from post-tax profits. The true optimal split requires modelling both personal and company tax together. A qualified accountant can help with a full analysis.

Does Marchant help with director salary and dividend planning?

Marchant tracks both salary payments and dividend declarations in one workspace. Your accountant can review your running position at any time to optimise the salary/dividend split for the year. Marchant also calculates Corporation Tax and prepares MTD VAT returns — all in one subscription.