Business structure · 2026/27 tax year
Dividend vs salary take-home UK 2026/27
For a given gross amount extracted from your company, compare illustrative employee take-home (PAYE Income Tax + employee Class 1 NI) with illustrative dividend take-home (dividend tax only).
Same headline cash: either all salary or all dividends (no corporation tax layer in this comparison).
Income Tax: £5,486
Employee Class 1 NI: £3,291
Take-home: £31,223
Dividend tax: £2,356
Take-home: £37,644
Understanding your results
Directors often mix salary and dividends for good reason: salary uses PAYE machinery you already trust; dividends flex with cash flow but carry different timing for tax payments on account.
Employee National Insurance is material on salary. This page includes employee Class 1 only; employer NI can add roughly another ten to fifteen percent on top of gross salary depending on thresholds — if you are comparing “what the company spends,” ask for an employer-cost view separately.
Dividend tax stacks after your allowances in bands that mirror Income Tax widths but use lower headline rates — until you hit higher bands, where the gap narrows. That is why “dividends are always cheaper” is not a safe mantra once you earn through basic rate.
Student loans and gift aid and pension contributions all consume band space before dividends arrive in real returns. This isolated comparison should be read as a module inside a fuller return picture.
If you are thinking about incorporating solely because of this page, pause: IR35, clients’ payment terms, and personal guarantee exposure matter as much as marginal income tax.
Disclaimer: This is a guidance estimate based on the 2026/27 tax year. It is not personal tax advice — consult an accountant or HMRC for your specific circumstances.
About this calculator
Employers also pay secondary Class 1 NI — not shown here. The comparison is from the director’s perspective on the same headline cash cost before employer charges.
Salary uses Rest-of-UK Income Tax bands on gross pay treated as only income, plus employee NI using primary and upper earnings limits aligned with common HMRC defaults.
Dividends use Personal Allowance, the dividend allowance, then 8.75%, 33.75%, and 39.35% slices. Corporation tax on company profits before paying dividends is not double-counted in this side-by-side — you should enter amounts you mean as “paid to you personally.”