UK Dividend Tax
Calculator 2025/26
The only UK dividend calculator that works from company profit down — showing corporation tax, optimal director salary, dividend tax, and total take-home in a single calculation. Includes the April 2026 dividend tax rise so you can plan ahead.
Dividend tax rates 2025/26
Dividends are taxed at lower rates than income because the company has already paid Corporation Tax on the profits before distributing them. The £500 dividend allowance means the first £500 of dividends are tax-free each year — down sharply from £5,000 in 2017/18.
| Band | Income range | 2025/26 rate | 2026/27 rate |
|---|---|---|---|
| Allowance | First £500 | 0% | 0% |
| Basic rate | £12,571 – £50,270 | 8.75% | 10.75% |
| Higher rate | £50,271 – £125,140 | 33.75% | 35.75% |
| Additional rate | Above £125,140 | 39.35% | 39.35% |
From April 2026, basic and higher rate dividend tax rises by 2 percentage points. If you’re planning to extract significant profits from your company, doing so before 5 April 2026 could save meaningful amounts. The calculator above shows you the cost difference.
Corporation tax and the optimal director salary
The most tax-efficient salary for most single-director companies in 2025/26 is either £12,570 (the personal allowance threshold) or £6,500 (just above the secondary NI threshold). Here’s the trade-off:
- £12,570 salary: No income tax for the director. No employee NI below £12,570. But employer NI is owed on the portion above £5,000 (at 15%). The salary is deductible from company profits, reducing corp tax. For most directors this is the optimal point — the corp tax saving outweighs the employer NI cost.
- £6,500 salary: No employer or employee NI at all. Simpler to administer. Slightly less tax-efficient overall because you lose some corp tax deduction, but the NI saving partially offsets this.
- £0 salary: Maximum dividends, minimum admin. No NI. But if your company has no other employees, you may lose a qualifying National Insurance year for State Pension.
If your company has two or more employees and is eligible for the Employment Allowance (£10,500 in 2025/26), the picture changes: the allowance covers employer NI, so a higher salary becomes more attractive.
How corporation tax is calculated with marginal relief
Since April 2023, corporation tax operates on a tiered system. Small companies with profits up to £50,000 pay 19%. Large companies above £250,000 pay 25%. In between, marginal relief creates an effective rate that rises smoothly — but the marginal rate on that middle slice is actually 26.5%, higher than the headline 25%.
Company profit: £150,000. Full 25% would give £37,500 corp tax. Marginal relief = (3/200) × (£250,000 − £150,000) = £1,500. Corp tax due = £37,500 − £1,500 = £36,000 (effective rate: 24%).
If profits were just £51,000 (just over the lower limit), the effective rate would be 19.13% — but the marginal rate on that extra £1,000 is 26.5%. This is important when deciding how much salary to take: a salary deduction reduces taxable profit, and if you’re in the marginal band, each £1 of salary costs the company 26.5p less in corp tax.
Note: if your company has associated companies (companies under common control), the £50,000 and £250,000 thresholds are divided between them. One associated company halves both limits to £25,000 and £125,000.
The total tax picture — why the company view matters
Most dividend calculators only show personal tax. But as a director-shareholder, you care about the total tax — company and personal combined — relative to what the company originally earned. This is the only meaningful efficiency measure.
Salary: £12,570, remaining profit as dividends. Corp tax on £87,430 (after salary) at 19% small profits rate = £16,612. Net after corp tax: £70,818. Director takes £12,570 salary (no tax, no NI) + £70,818 dividends. Personal tax: £500 allowance, then 8.75% basic rate on most of the remainder = approximately £6,136. Total personal tax on salary+dividends: ~£6,136. Total tax company+personal: ~£22,748 on £100,000 revenue = effective rate ~22.7%.
Compared to a sole trader on the same £100,000 profit: income tax + Class 4 NI ≈ £28,460. The limited company saves roughly £5,700 — though you also pay accountancy fees and Companies House filing costs to run the company.
Dividends vs salary — the key differences
| Factor | Salary | Dividends |
|---|---|---|
| National Insurance (employee) | 8% (above £12,570) | None |
| National Insurance (employer) | 15% (above £5,000) | None |
| Income tax rate (basic) | 20% | 8.75% |
| Deductible from company profits | Yes (reduces corp tax) | No |
| State Pension qualifying year | Yes (if earnings ≥ £6,396) | No |
| Tax paid | Via PAYE (immediately) | Via Self Assessment (following Jan) |
You can only pay dividends out of accumulated retained profits. If you pay dividends in excess of available profits, they are classed as ultra vires (unlawful) and may be treated as a director’s loan by HMRC — creating a tax charge at 33.75% on the overdrawn balance. Always check your company’s retained profit position before declaring a dividend.
Frequently asked questions
Self-employed tax, CGT on shares, inheritance tax — all the numbers directors need.