How this calculation works
Taking money out of your own limited company happens in two taxed steps, and most directors only think about one of them. This calculator shows both.
Step one is corporation tax. Your company pays tax on its profits. We first take off a tax-efficient director's salary of £12,570 (a deductible expense that uses your personal allowance), then corporation tax is charged on what's left.
Step two is dividend tax. Whatever remains after corporation tax can be paid out to you as dividends, and you then pay personal tax on those dividends. Your salary sits at the bottom of your income, and dividends stack on top, so the more you take, the higher the rate the top slice is taxed at.
This is why your effective rate climbs: profit is taxed once inside the company, then again when you extract it. Planning the salary/dividend split, the timing, and pension contributions is how you keep more of it, legally.
Corporation tax rates (2026/27)
- 19% on profits up to £50,000 (small profits rate)
- 25% on profits over £250,000 (main rate)
- Between £50,000 and £250,000, marginal relief applies, giving an effective 26.5% on each extra pound of profit in that band, higher than the headline main rate
The £50,000 and £250,000 thresholds are divided by the number of associated companies you control, which can quietly push a company into a higher band. This calculator assumes no associated companies.
Dividend tax rates (2026/27)
- First £500 of dividends is tax-free (the dividend allowance)
- 10.75% on dividends in the basic rate band
- 35.75% on dividends in the higher rate band
- 39.35% on dividends in the additional rate band
The basic and higher rates rose by 2 percentage points from 6 April 2026, so extracting profit costs a little more this year than last. With income tax thresholds frozen, more directors are also being pulled into the higher band over time.
The marginal relief trap
The most common, and most expensive, thing we see is a company sitting just inside the marginal relief band without realising the effective rate there is 26.5%, not 25%. At profits a little over £50,000, even a modest, well-timed pension contribution can pull profit back under the line and lock in the 19% rate. It's a genuine planning opportunity that's easy to miss if no one's looking before year-end.
If your company is also growing toward the VAT registration threshold, it's worth checking that too: our VAT threshold calculator shows how close you are to the £90,000 rolling limit. And for the strategy behind these numbers, our guide on how to pay yourself from a limited company explains the salary and dividend split in plain English.