UK Dividend Tax Calculator
Calculate your dividend tax for limited company directors, shareholders, and self-employed business owners. See your combined take-home from salary and dividends.
Income Details
Calculate dividend tax for 2025/26
Many Ltd company directors take £12,570 salary (Personal Allowance) to minimize tax
Salary at £12,570 uses your full Personal Allowance tax-free.
Combined Take-Home
After tax breakdown for 2025/26
Total Take-Home Pay
£39,989
From £42,570 total income
Salary
Dividends
Total Income
£42,570
Salary + Dividends
Dividend Tax Rate
8.6%
Effective rate on dividends
You Keep
93.9%
Of total income
Monthly
£3,332
Take-home per month
Dividend Tax Rates 2025/26
Tax-Free Allowance
£500
Basic Rate
8.75%
Up to £50,270 total
Higher Rate
33.75%
£50,271 to £125,140
Additional Rate
39.35%
Over £125,140
Understanding Dividend Tax in the UK
How Dividend Tax Works
Dividends are paid from company profits after Corporation Tax (25% or 19%). When you receive dividends, you pay additional tax based on your total income and tax band.
Dividend Tax Rates 2025/26:
- • Tax-free allowance: £500
- • Basic rate (up to £50,270): 8.75%
- • Higher rate (£50,271-£125,140): 33.75%
- • Additional rate (over £125,140): 39.35%
Optimal Ltd Company Strategy
💰 Salary: £12,570
Take salary up to Personal Allowance. No income tax, minimal NI, and it qualifies for pension and state benefits.
📈 Dividends: Rest of Income
Take remaining income as dividends at 8.75% (basic rate) - much lower than 28% on salary. No NI on dividends.
⚠️ Corporation Tax First
Remember: dividends come from profits after 25% (or 19%) Corporation Tax. Total tax is higher than just the dividend rate.
Salary vs Dividends Comparison
| Factor | Salary | Dividends |
|---|---|---|
| Income Tax | 20-45% | 8.75-39.35% |
| National Insurance | 8% employee + 15% employer | None |
| Corporation Tax | Deductible expense | Paid before dividends |
| Pension Contributions | Yes | No (from company only) |
| State Benefits | Yes (above £12,570) | No |
| When to Use | Up to Personal Allowance | After salary threshold |
Frequently Asked Questions
What are the dividend tax rates for 2025/26?
For 2025/26, dividend tax rates are: 8.75% (basic rate), 33.75% (higher rate), and 39.35% (additional rate). You also get a £500 tax-free dividend allowance. Corporation tax has already been paid on company profits before dividends are distributed.
What is the most tax-efficient salary for a Ltd company director?
The most tax-efficient salary is typically £12,570 (the Personal Allowance threshold). This uses your full tax-free allowance, avoids income tax on salary, and minimizes National Insurance. You can then take additional income as dividends which are taxed at lower rates.
How much can I take in dividends tax-free?
The dividend allowance for 2025/26 is £500. Dividends within this allowance are tax-free. Additionally, any dividends that fall within your Personal Allowance (if not used by other income) are also tax-free.
What is the difference between salary and dividends tax?
Salary is subject to Income Tax (20-45%) and National Insurance (8-2% employee, 15% employer). Dividends have lower tax rates (8.75-39.35%) and no NI, but are paid from post-corporation-tax profits. Combined, dividends are usually more tax-efficient for company directors.
Should I pay myself salary or dividends from my limited company?
Most directors take a combination: salary up to £12,570 (NI threshold) plus dividends. This maximizes tax efficiency. However, salary provides pension contributions and employment benefits, so consider your full situation. Higher earners may prefer more salary for pension contribution allowances.