UK Director's Tax Calculator
Find the optimal salary & dividend split for your limited company. See exactly how much you'll take home.
Updated for 2025/26 tax year
Your Details
Your company's profit before paying yourself
The salary you pay yourself (rest taken as dividends)
Common salary options:
Your Tax Breakdown
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How the UK Director's Tax Calculator Works
As a UK limited company director, you have flexibility in how you pay yourself. The most tax-efficient strategy for most directors is a combination of salary and dividends.
Why £12,570 is Often the Optimal Salary
The 2025/26 personal allowance is £12,570. By paying yourself this amount as salary:
- You pay no income tax (it's within your personal allowance)
- You pay minimal National Insurance
- You maintain your NI record for state pension
- The salary is a deductible expense for Corporation Tax
Taking the Rest as Dividends
After paying Corporation Tax on remaining profits, you can take dividends. Dividends are taxed at lower rates than salary:
- 8.75% basic rate (vs 20% income tax)
- 33.75% higher rate (vs 40% income tax)
- No National Insurance on dividends
Important Considerations
This calculator provides an estimate. Your actual situation may vary based on:
- Other income sources
- Student loan repayments
- Pension contributions
- IR35 status for contractors
Disclaimer: This calculator is for illustrative purposes only and does not constitute tax advice. Tax rules change frequently. Consult a qualified accountant for advice specific to your situation.
Frequently Asked Questions
Everything you need to know about UK tax calculations for company directors
How is income tax calculated in the UK?
UK income tax is calculated in bands. For 2025/26, you pay 0% on income up to £12,570 (personal allowance), 20% on income from £12,571 to £50,270 (basic rate), 40% on income from £50,271 to £125,140 (higher rate), and 45% on income over £125,140 (additional rate). Your personal allowance reduces by £1 for every £2 earned over £100,000.
What are the current UK tax bands for 2025/26?
The UK tax bands for 2025/26 are: Personal Allowance (0% tax) up to £12,570, Basic Rate (20%) from £12,571 to £50,270, Higher Rate (40%) from £50,271 to £125,140, and Additional Rate (45%) over £125,140. These thresholds have been frozen since 2021 and are scheduled to remain until 2028.
How does National Insurance work for company directors?
Company directors pay Class 1 National Insurance on salary earnings. For 2025/26, you pay 8% on earnings between £12,570 and £50,270, and 2% on earnings above £50,270. Your company also pays Employer's NI at 15% on salary above £5,000. Taking a salary of £12,570 keeps you in the NI system for state pension credits while minimizing the total NI burden.
Why is taking salary and dividends more tax efficient?
Dividends are taxed at lower rates than salary: 8.75% (basic rate), 33.75% (higher rate), and 39.35% (additional rate), compared to 20%, 40%, and 45% for salary. Additionally, dividends don't attract National Insurance. By taking a salary up to the personal allowance (£12,570) and the rest as dividends, you minimize both income tax and NI while maintaining your state pension record.
What is the optimal salary for a UK limited company director?
For most directors in 2025/26, the optimal salary is £12,570 (the personal allowance). This amount is tax-free, qualifies you for a full year of state pension credits, and is deductible as a business expense for Corporation Tax purposes. Taking more as salary triggers higher income tax and National Insurance costs.
How much Corporation Tax will my company pay?
For 2025/26, companies with profits under £50,000 pay 19% Corporation Tax (small profits rate). Companies with profits over £250,000 pay 25% (main rate). Profits between these amounts are subject to marginal relief, resulting in an effective rate between 19% and 25%. Your salary is deducted from profits before Corporation Tax is calculated.