A director salary calculator works what a given salary costs the director and the company, and, because a director's pay is rarely salary alone, what the dividend tax on the rest of their income adds to it. The salary carries income tax above the personal allowance and National Insurance for both parties above their thresholds; the dividends carry dividend tax above the allowance at the rate for the band the director's total income reaches. This page sets out those figures for 2026 to 2027 as gov.uk publishes them, explains the two thresholds that shape the typical directors salary, and shows how the free ltd company tax calculator on this site works salary and dividend together as one tax calculator with dividends, because the director's tax bill is one bill.
The thresholds that shape a director's salary
Per gov.uk for 2026 to 2027: the personal allowance and the employee's primary threshold are both £12,570 a year, so a salary up to that figure carries no income tax and no employee's National Insurance. The employer's secondary threshold is £5,000, so the company pays employer's NI at 15 percent on salary above it unless it can claim the Employment Allowance of £10,500, which a company with a single director-employee cannot. A salary between £5,000 and £12,570 therefore costs the company 15 percent on the excess and the director nothing, and every pound of that salary and NI is deducted for corporation tax.
Income tax and NI on salary above the allowance
Above £12,570 the director pays income tax at 20 percent to the basic rate limit and employee's National Insurance at 8 percent to the upper earnings limit, per gov.uk, and the company continues to pay 15 percent employer's NI. That is 43 pence in tax and NI on every extra pound of salary in the basic band before corporation tax relief is counted, against 10.75 pence of dividend tax on a pound of dividend that has borne corporation tax. The directors salary calculator on this site prints the salary tax and the employer's NI as their own lines so that comparison is on the sheet.
The dividend tax on top
Dividends are stacked above the salary. The income and dividend tax calculator finds the band the total reaches, takes the £500 allowance off the dividends, and applies 10.75 percent, 35.75 percent or 39.35 percent to the rest, per gov.uk. A director on £12,570 salary and £37,700 of dividends is exactly at the top of the basic rate band; the next pound of dividend is taxed at 35.75 percent, which is the figure most directors are steering around when they set the year's dividend.
What the calculator does not do
It does not run payroll, produce a payslip or file a Full Payment Submission; a salary has to go through PAYE and Real Time Information whatever the amount, and the dividend tax uk calculator here is the director's forecast rather than HMRC's record. It does not apply Scottish rates to salary, which differ, or the personal allowance taper above £100,000 of income, or benefits in kind. Where any of those apply the sheet is a first estimate and the return is the answer.
Questions people ask about director salary calculator
What is the most common director's salary?
£12,570 or the £5,000 secondary threshold, for the reasons above: the first uses the whole personal allowance and costs employer's NI on £7,570, the second costs no NI at all. Both earn a state pension qualifying year, since both are above the lower earnings limit for 2026 to 2027 on gov.uk.
Does a director pay National Insurance differently?
Directors' NI is worked on an annual basis rather than per pay period, so a director paid unevenly through the year is charged on the year's total against the annual thresholds. The rates are the same as for any employee: 8 percent for the employee and 15 percent for the employer above their thresholds.
Can the company pay a salary if it made a loss?
Yes. Salary is a cost of the company and does not depend on profit, unlike a dividend. A salary paid in a loss-making year simply increases the loss carried forward. That is one of the few cases where salary is the only lawful way to pay the director.