Contractor Salary & Dividends Calculator 2026/27
Last updated: 09 September 2026 · 2026/27 UK tax year
Find the optimal salary/dividend split for your Limited Company. Compare Inside vs Outside IR35, see Corporation Tax on your profits, and calculate your real take-home for 2026/27.
Your Ltd Company
Paid directly from the Ltd Co into your pension (saves Corp Tax).
Total Personal Take-Home Pay
£56,383
💡 Why £12,570 salary?
We've automatically set your salary to £12,570. This perfectly uses up your tax-free Personal Allowance and qualifies you for State Pension credits, without triggering any Income Tax or Employee National Insurance.
Disclaimer: This calculator provides an estimate based on standard HMRC tax rules for the 2026/27 tax year. It does not account for cumulative PAYE codes, previous underpayments, or specific employer payroll configurations. It is not professional financial advice. For definitive figures, always refer to your official payslip or your HMRC Personal Tax Account.
Optimal salary/dividend split 2026/27
The standard accountant recommendation for a solo Ltd company director outside IR35 is a £12,570 salary + dividends strategy:
- Salary: £12,570/year — uses your Personal Allowance fully. Zero Income Tax, zero Employee NI. Qualifies as a State Pension year. Deductible from company profits (saves Corp Tax).
- Dividends: remaining profit after Corp Tax — first £500 is tax-free (Dividend Allowance). Basic rate dividends taxed at just 8.75% vs 20% income tax.
- Employer pension: Direct employer contributions to your SIPP bypass Corp Tax, Income Tax, and dividend tax entirely — the most efficient withdrawal method.
| Annual revenue | Corp Tax (19%) | After Corp Tax | Salary taken | Dividends taxable | Approx total tax | Effective rate |
|---|---|---|---|---|---|---|
| £60,000 | ~£8,930 | ~£51,070 | £12,570 | £38,000 | ~£11,650 | ~19% |
| £100,000 | ~£16,530 | ~£83,470 | £12,570 | £70,400 | ~£26,750 | ~27% |
| £150,000 | ~£28,030 | ~£121,970 | £12,570 | £109,000 | ~£55,000 | ~37% |
Estimates. Assumes no personal expenses, no pension contributions, standard 1257L tax code. Revenue = billable fee income.
Corporation Tax on limited company profits 2026/27
Corporation Tax is paid by your Limited Company on profits before you take dividends. The rate depends on profit level:
| Company profit | Rate | Notes |
|---|---|---|
| Up to £50,000 | 19% (Small Profits Rate) | Most solo contractors fall here |
| £50,001 – £249,999 | Marginal Relief (19–25%) | Effective marginal rate 26.5% in this band |
| £250,000+ | 25% (Main Rate) | Flat rate — no marginal relief |
Employer pension contributions reduce company profit before Corporation Tax is calculated. A £10,000 employer pension contribution saves £1,900 in Corp Tax (at 19%) in addition to saving all personal income/dividend tax on that amount.
Dividend tax rates 2026/27
Dividends are paid from after-Corporation Tax profits. They do not attract National Insurance. Tax rates on dividends:
| Band | Total income threshold | Dividend tax rate |
|---|---|---|
| Dividend Allowance | First £500 of dividends | 0% |
| Basic Rate | Total income up to £50,270 | 8.75% |
| Higher Rate | Total income £50,271 – £125,140 | 33.75% |
| Additional Rate | Total income above £125,140 | 39.35% |
How inside vs outside IR35 changes the calculation
Inside IR35 fundamentally breaks the Ltd company model. Here is the comparison at £400/day (220 days):
- Revenue paid gross into Ltd
- Corp Tax ~19% on profits
- Salary + dividends
- Take-home: ~£60,000–£65,000
- Effective rate: ~25–30%
- Employer NI 15% deducted first
- Apprenticeship Levy 0.5%
- Full PAYE on gross pay
- Take-home: ~£49,000–£52,000
- Effective rate: ~42–44%
Compare your IR35 options
See your exact retention rate inside vs outside IR35 with your day rate, or understand how your umbrella company deductions work.