Dividend Tax Calculator

For UK limited company directors, dividends are the primary way to extract profit from the company in a tax-efficient manner. Unlike salary, dividends carry no National Insurance — for either you or the company — which is the core reason the salary-plus-dividends structure is so widely used. But dividends are not tax-free: they are taxed at specific rates that depend on your total income, and they always sit on top of your salary when calculating which rate band applies.

In 2026-27, the dividend allowance is £500 — the amount you can receive tax-free each year. This has fallen sharply from £5,000 in 2016-17, reducing the tax-free space available for dividend planning. Above the allowance, dividend tax rates are:

• 8.75% — basic rate band (income up to £50,270)
• 33.75% — higher rate band (income £50,271–£125,140)
• 39.35% — additional rate band (income above £125,140)

The most important planning consideration is the £100,000 trap. For every £2 of income above £100,000, you lose £1 of personal allowance. Between £100,000 and £125,140, your effective marginal rate on additional income — including dividends pushing you through this zone — can reach 60%. Pension contributions are the most common mechanism directors use to avoid this band.

This calculator shows the dividend tax on your planned draw, broken down by rate band, alongside the total tax position when combined with your director salary.