Work out exactly what HMRC takes from your salary and dividends as a limited company director — for 2026/27 with the new dividend rates, or 2025/26 for last year’s bill.
Dividend tax calculator for directors
See your full personal tax bill on a salary-plus-dividends mix, with the breakdown HMRC actually uses.
Your income
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Personal tax estimate only. Excludes Corporation Tax (paid by the company), employer National Insurance, student loan, pension contributions, and any other income. Rates based on HMRC and gov.scot published bands. For estimates, not advice.
How dividend tax works for directors
If you run a UK limited company, the company pays Corporation Tax on its profits first. Whatever’s left can be paid out to shareholders — including you — as dividends. Dividends don’t attract National Insurance, which is why a low salary plus dividends has been the standard director’s pay structure for years. The catch: HMRC taxes those dividends as personal income, on top of any salary you’ve already drawn.
Your tax bill depends on three things: how much salary you take (and the income tax + NI on it), how much you draw in dividends (taxed at separate dividend rates), and where the combined total lands across the income tax bands. From April 2026, basic-rate dividend tax went up to 10.75% and higher-rate to 35.75% — a two-percentage-point rise on both. The additional rate stayed at 39.35%. The £500 dividend allowance still exists, but it doesn’t go far.
The dividend allowance is not a free £500. It taxes the first £500 of dividends at 0%, but those £500 still use up part of your basic-rate band. If your other income already pushes you into higher rates, the allowance shields less than you’d think.
How to use the calculator
- Pick your tax year — 2026/27 is current (from 6 April 2026), 2025/26 is the previous year.
- Pick your region. Scotland has different bands for salary, but dividend rates are UK-wide.
- Enter your annual salary from the company. Many directors set this at £12,570 (the personal allowance) for tax efficiency.
- Enter total dividends you plan to take this tax year.
- The dark card shows your take-home and effective tax rate. Open the breakdown to see exactly which pounds were taxed at which rate.
Common scenarios
£12,570 salary + £40,000 dividends (2026/27)
The classic small-company director pay packet. Salary uses up the full personal allowance, so no income tax or employee NI on it. £500 of dividends are tax-free via the allowance. The next £37,200 of dividends fall in the basic-rate band (10.75% = £3,999), and the remaining £2,300 sit in the higher-rate band (35.75% = £822). Total personal tax: around £4,821. Take-home: roughly £47,749 of £52,570 gross — about 9.2% effective rate.
£12,570 salary + £75,000 dividends (2026/27)
A more aggressive draw. Salary still soaks up the personal allowance. £500 covered by the dividend allowance. Around £37,200 in the basic band at 10.75% (£3,999). The next £37,300 lands in the higher-rate band at 35.75% (£13,335). Total personal tax: around £17,334 on £87,570 gross — roughly 19.8% effective. The higher-rate dividend tax is doing most of the damage here.
£60,000 salary + £20,000 dividends (2026/27)
Higher salary scenario — common when you want maximum pension contribution headroom or you’ve taken on a co-director role. Salary triggers income tax (20% then 40%) plus employee NI (8% then 2%). All dividends sit in the higher-rate band immediately, taxed at 35.75% bar the £500 allowance. Total personal tax climbs above £20,000.
Scottish director: £12,570 + £50,000 dividends (2026/27)
Salary fits inside the personal allowance, so the Scottish bands don’t bite. Dividends use UK-wide rates regardless of residency, so the bill is essentially the same as an English director on the same numbers. The Scottish bands only matter when your salary itself crosses into Scottish higher-rate territory (£43,662).
How to reduce your dividend tax bill
- Use both spouses’ allowances. If your partner has unused personal allowance, basic-rate band, or dividend allowance, transferring shares to them can shift income into lower bands. The shares must be a genuine outright gift, not a tax dodge.
- Pay into a pension via the company. Employer pension contributions reduce company profits (and therefore Corporation Tax) and don’t appear on your personal tax bill at all. Annual allowance is £60,000 in 2026/27 for most directors.
- Time large dividends across tax years. If you’re close to the higher-rate threshold, splitting a £20,000 dividend across two tax years can keep it in the basic-rate band both times.
- Avoid the £100k taper. Personal allowance is withdrawn at £1 per £2 above £100,000 of income, creating an effective 60%+ marginal rate. A pension contribution to bring adjusted net income back under £100,000 often pays for itself.
- Hold investments inside an ISA. Dividends from shares in an ISA are completely outside the tax system — no allowance limit, no reporting.
Frequently asked questions
Do I need to file Self Assessment for dividends?
Above £10,000 of dividends, yes — you must register and file. Between £500 and £10,000, you can either file Self Assessment or ask HMRC to change your tax code so the tax is collected through PAYE on your salary. Below £500, no reporting needed unless you already file for another reason.
Why is the £12,570 salary so common for directors?
It uses your full personal allowance against salary (no income tax, no employee NI since the primary threshold is also £12,570), keeps you eligible for state pension credits, and lets dividends sit on top with the lower dividend tax rates instead of full income tax + NI on salary. The company does pay employer NI on the salary above £5,000, which is a small cost worth modelling separately.
Are dividend rates different in Scotland?
No. Dividend tax rates are set by HMRC and apply UK-wide. Scotland sets its own rates only for salary and other non-savings, non-dividend income. So a Scottish director with the same salary and dividend mix as an English one pays the same dividend tax — but may pay more or less income tax on the salary itself.
Does the calculator include Corporation Tax?
No. This is a personal tax estimate — what HMRC takes from you, the individual. The company pays Corporation Tax (19% to 25% depending on profits) before any dividend can be declared. To see the full picture, multiply the dividend by roughly 1.25 to estimate the pre-tax profit needed, then add personal tax.
What if I have other income — rental, savings, salary from another job?
This calculator assumes salary and dividends from one company are your only income. Other income changes which bands your dividends fall into. If you have significant other earnings, treat the result as an under-estimate and check with an accountant.
Bottom line
Dividends still beat extra salary for most directors, especially below the higher-rate threshold. But the April 2026 rate rises ate two percentage points of the gap, and the £500 allowance has become decorative. Model your actual numbers before declaring large dividends — and remember that the cheapest pound of tax is the one you defer into a pension.
Sense-check the other half
See what Corporation Tax leaves you with before the dividend is even paid.
