[ BracketMath ]

UK Tax Year 2026/27 · Ltd Co directors (rUK)

Salary–Dividend Split Optimiser

Find the salary, dividend and pension-contribution combination that minimises your combined tax bill across corporation tax, employer NI, employee NI, income tax, and dividend tax — solved as one joint problem, not five separate ones.

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How it works

The calculator runs a two-dimensional grid search over (salary, pension contribution). For every combination it computes the full chain:

  1. Employer NI on the salary (15% above £5,000 ST).
  2. Pre-CT profit = company profit − salary − employer NI − pension contribution.
  3. Corporation tax on the pre-CT profit, including the marginal-relief band between £50k and £250k where the effective rate climbs from 19% to 25%.
  4. The remainder is paid as dividend (max-extraction model).
  5. Personal tax on the salary using the rUK bands, with the personal allowance tapered against total income (salary + dividends) above £100k.
  6. Dividend tax stacked on top of the salary, at 8.75% / 33.75% / 39.35% in the basic / higher / additional bands, with the £500 allowance applied at the lowest-taxed slice of the dividend.
  7. Employee NI on the salary (8% main band, 2% above £50,270).

Net wealth is then defined as net cash + (pension × pension weight). The slider in the sidebar lets you adjust how much you value £1 in a pension vs £1 of cash today. A weight of 0 ignores pension entirely (purely cash-maximising); a weight of 1.0 treats them as equally valuable.

Why "just pay £12,570 then dividend the rest" isn't always right

The classic accountant's rule of thumb works well for profits between roughly £40k and £80k. It breaks down in three places:

  • The £100k personal-allowance taper creates a 60% effective marginal rate. Pension contributions can dodge this entirely.
  • The £50k–£250k marginal-relief band means corporation tax has a 26.5% effective marginal rate on profits in that range. Salary and pension reduce taxable profit and are unusually efficient there.
  • The £125,140 additional-rate threshold bumps dividend tax to 39.35%. For directors above this level, paying higher salary (lower marginal NI than dividend tax) starts to win.

Sources

This calculator runs entirely in your browser. We do not store, log or transmit your inputs to any server. See the disclaimer for the usual warnings about why a calculator is not a substitute for an accountant.