UK Ltd Company Tax Calculator | Free & Accurate

How to Use This Calculator

Getting the most from this calculator is straightforward. Here’s what you need to enter:

Company Taxable Profit

This is your company’s profit after deducting all allowable business expenses. Don’t confuse this with turnover or revenue. Your taxable profit is what remains after you’ve subtracted costs like staff wages, office rent, equipment, and other legitimate business expenses. If you’re not sure of your exact figure, your accountant can help you work this out from your company accounts.

Director’s Salary

Enter the annual salary you pay yourself as a director. Many directors choose to pay themselves around £12,570, which is the personal allowance threshold for 2025/26. This amount doesn’t attract Income Tax or National Insurance, making it tax-efficient. You can enter any amount, and the calculator will work out the appropriate tax and NI deductions.

Dividend Withdrawals

After Corporation Tax, you can distribute profits to shareholders as dividends. Enter the amount you plan to take as dividends. Remember, dividends are only paid from profits that remain after Corporation Tax has been paid. The calculator will show you how much dividend tax you’ll owe based on your total income.

Associated Companies

If your company has associated companies, the Corporation Tax thresholds get divided between them. For example, if you have one associated company, the £50,000 and £250,000 thresholds become £25,000 and £125,000 respectively. Enter the number of associated companies here, and the calculator adjusts the thresholds accordingly.

How Corporation Tax Works

Corporation Tax is what your limited company pays on its profits. The rates changed in April 2023, introducing a tiered system that affects companies differently based on their profit levels.

The Three Tax Brackets

Your company will fall into one of three brackets. If your profits are up to £50,000, you’ll pay 19% Corporation Tax. This is the small profits rate, designed to support smaller businesses. Once your profits exceed £250,000, you’ll pay the main rate of 25% on all your profits.

The interesting bit is what happens in between. If your profits fall between £50,000 and £250,000, you’ll benefit from marginal relief. This means you don’t suddenly jump from 19% to 25% tax. Instead, your effective rate gradually increases. The calculator works this out automatically using HMRC’s marginal relief formula.

What Marginal Relief Actually Means

Let’s say your company makes £100,000 profit. Without marginal relief, you’d pay 25%, which would be £25,000. But marginal relief reduces this. The relief is calculated using this formula: (3/200) × (£250,000 – your profit) × (your profit / your profit). In practice, this means you’ll pay an effective rate of around 21.5% instead of the full 25%.

The closer you get to £250,000, the less relief you receive, until it phases out completely at the upper threshold. This graduated approach means there’s no cliff edge where your tax bill suddenly jumps.

Dividend Tax Explained

Once you’ve paid Corporation Tax, what’s left belongs to the shareholders. That’s you, if you own the company. You can take these profits as dividends, but there’s personal tax to consider.

Your Dividend Allowance

For 2025/26, you get a £500 dividend allowance. This means the first £500 of dividends you receive is tax-free. It used to be much higher, but it’s been reduced in recent years. After this allowance, you’ll pay dividend tax at rates that depend on your total income.

How Dividend Tax Rates Work

Dividend tax rates are lower than rates on salary, which is why dividends are often more tax-efficient. If your total income (salary plus dividends) falls within the basic rate band (up to £50,270), you’ll pay 8.75% on dividends. Move into the higher rate band (£50,271 to £125,140), and the rate increases to 33.75%. Earn above £125,140, and you’ll pay 39.35% on dividends in that bracket.

Here’s what many people get confused about: dividend tax is calculated on your total income. Your salary uses up part of your personal allowance and basic rate band first, then dividends fill up the rest. The calculator handles this complexity for you, showing exactly how much tax you’ll owe based on your combined income.

Salary vs Dividends: Which Approach Works Best?

This is the question every limited company director asks. The short answer is: usually a combination of both. Here’s why.

Why Not Just Take Salary?

Salary attracts both Income Tax and National Insurance. Not just employee NI (which you pay), but also employer NI (which your company pays). For 2025/26, you’ll pay 8% employee NI on earnings between £12,571 and £50,270, plus 2% on anything above. Your company also pays 15% employer NI on earnings above £5,000.

Let’s say you pay yourself a £30,000 salary. You’d pay £1,394 in employee NI, and your company would pay £3,750 in employer NI. That’s £5,144 in NI contributions alone, before Income Tax.

Why Not Just Take Dividends?

Dividends don’t attract National Insurance, which sounds brilliant. But there’s a catch: you pay Corporation Tax on profits before you can take dividends. Then you pay dividend tax on what you withdraw. It’s a double taxation of sorts, though the rates are structured to account for this.

Also, dividends don’t count towards your State Pension. Salary does. If you pay yourself no salary at all, you might have gaps in your National Insurance record, affecting your State Pension entitlement.

The Sweet Spot

Most accountants recommend taking a salary up to the personal allowance (£12,570) or the National Insurance threshold. This gives you a State Pension qualifying year without paying any tax or NI. Then top up your income with dividends, which are taxed more favourably.

Common Scenarios and Strategies

Scenario 1: Small Profit (Under £50,000)

Your company makes £40,000 profit. You pay 19% Corporation Tax (£7,600), leaving £32,400. Take £12,570 as salary (no tax or NI), then £19,830 as dividends. After the £500 dividend allowance, you’d pay 8.75% on £19,330, which is £1,691. Your total take-home is £30,709 from £40,000 profit.

Scenario 2: Medium Profit (£50,000-£250,000)

Your company makes £120,000 profit. Corporation Tax with marginal relief works out at around 22.5% (£27,000), leaving £93,000. Take £12,570 salary, then £50,000 dividends. You’d pay 8.75% on £37,200 of dividends (£3,255), and 33.75% on the remaining dividends that push you into the higher rate band. This strategy maximises tax efficiency while keeping you in a reasonable tax bracket.

Scenario 3: High Profit (Over £250,000)

Your company makes £300,000 profit. You’ll pay 25% Corporation Tax (£75,000), leaving £225,000. At this level, you need to think carefully about how much to withdraw. Taking large dividends pushes you into the additional rate band (39.35% dividend tax). Many directors at this level leave profits in the company for reinvestment or pension contributions, which are tax-deductible.

Frequently Asked Questions

References