Salary vs dividends for 2026/27: worked examples at £35,000 profit, dividend tax at 10.75%, and a total-tax comparison, with GOV.UK sources.
Key figures 2026/27
| Item | Amount / rate |
|---|---|
| Personal allowance | £12,570 |
| Dividend allowance | £500 |
| Basic-rate dividend tax | 10.75% |
| Higher-rate dividend tax | 35.75% |
| Additional-rate dividend tax | 39.35% |
| Small profits corporation tax rate | 19% |
| Employer NI (illustrative secondary threshold) | 15% above £5,000 |
Sources: GOV.UK tax on dividends · GOV.UK corporation tax rates. Dividend rates shown apply from 6 April 2026.
In this guide, we’ll compare two strategies for a company with £35,000 profit before director payments:
- Low salary (£6,500) plus dividends
- Higher salary (£12,570) plus dividends
Assumptions: single director, no other income, no Employment Allowance, small profits CT rate 19%, employer NI 15% above a £5,000 secondary threshold. Unused personal allowance offsets dividends. Illustrative — confirm current HMRC figures for your case.
Option 1: Low Salary (£6,500) + Dividends
| Detail | Amount |
|---|---|
| Salary paid | £6,500 |
| Employer’s NI | £225 |
| Profit after salary & NI | £28,275 |
| Corporation tax @ 19% | £5,372 |
| Dividends available | £22,903 |
| Unused personal allowance on dividends | £6,070 @ 0% |
| Dividend within £500 allowance | £500 @ 0% |
| Taxable dividends | £16,333 @ 10.75% |
| Dividend tax due | £1,756 |
| Gross income (salary + dividends) | £29,403 |
| Net take-home | £27,647 |
| Total tax (CT + NI + dividend) | £7,353 |
Option 2: Higher Salary (£12,570) + Dividends
| Detail | Amount |
|---|---|
| Salary paid | £12,570 |
| Employer’s NI | £1,136 |
| Profit after salary & NI | £21,294 |
| Corporation tax @ 19% | £4,046 |
| Dividends available | £17,248 |
| Dividend within £500 allowance | £500 @ 0% |
| Taxable dividends | £16,748 @ 10.75% |
| Dividend tax due | £1,800 |
| Gross income (salary + dividends) | £29,818 |
| Net take-home | £28,018 |
| Total tax (CT + NI + dividend) | £6,982 |
Best director salary option for 2026/27
| Metric | £6,500 salary | £12,570 salary |
|---|---|---|
| Net personal income | £27,647 | £28,018 |
| Total tax paid | £7,353 | £6,982 |
| State pension qualifying year | Yes* | Yes |
*Confirm the current Lower Earnings Limit on GOV.UK if you set a very low salary.
For this £35,000-profit example, taking a salary up to the personal allowance (£12,570) and the balance as dividends leaves about £371 more in your pocket and pays about £371 less total tax than the low-salary route — after applying unused personal allowance to dividends under Option 1 and the April 2026 dividend tax rises.
Try our UK take-home pay calculator, read dividend tax planning 2026/27, or see limited company accounting packages.
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