UK Director Salary vs. Dividend Tax Calculator
Determine the most tax-efficient split between director salary and dividend payments for your UK limited company.
Your proposed salary is close to the HMRC optimal threshold, maximising tax-free allowances and deductions.
Proposed vs. Optimal Split Comparison
| Tax Component | Proposed | Optimal |
|---|---|---|
| Gross Director Salary | £12,570 | £12,570 |
| Max Available Dividends | £38,030 | £38,030 |
| Company Corporation Tax | +£8,921 | +£8,921 |
| Employer National Insurance | +£479 | +£479 |
| Director Income Tax & Employee NI | +£0 | +£0 |
| Director Dividend Tax | +£3,284 | +£3,284 |
| Net Combined Take-Home Pay | £47,317 | £47,317 |
Director Remuneration Strategy Guide (Ltd Companies)
Why is the optimal salary £12,570?
A salary of £12,570 matches the Personal Allowance and the Primary Threshold for Employee National Insurance. This allows you to earn a salary tax-free, keeps your State Pension record active with a qualifying year, and deducts the salary from company profits to reduce Corporation Tax.
What is the Dividend Allowance?
The Dividend Allowance is a tax-free allowance of £500. Any dividend income received over this threshold is taxed according to your income tax band (8.75% basic rate, 33.75% higher rate, and 39.35% additional rate).
How do associated companies affect the limits?
If your company has associated companies under common control, the Corporation Tax profit thresholds (£50k and £250k) are divided equally among those entities. This calculator incorporates these adjusted thresholds when evaluating the company's corporate tax deduction savings.
What about Scottish Income Tax?
Please note that this calculator applies standard UK (England, Wales, and Northern Ireland) income tax thresholds. Scotland has different income tax rates and bands, although National Insurance and Dividend Tax rates remain aligned across the UK.
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