Frequently asked questions

No. The calculations are simplified, illustrative estimates and may not apply to your circumstances.

Confirm important decisions with a qualified tax professional.

I built Tax Shrink after needing to compare salary and dividends for my own limited company. The rule of thumb my accountant used was reasonable, but it did not show the combined company and personal tax calculation I wanted to verify. I made the tool available so other owner-directors can run the same comparison.

Tax Shrink is a free illustrative estimator, not tax advice, and I am not a tax professional. The methodology and official sources explain its scope and limits.

Christian Prokopp · Tax Shrink creator and limited company director

Tax Shrink is published by Bold Data Ltd, which is responsible for the site's terms and privacy notice. It is not produced or reviewed by HMRC, and Bold Data Ltd does not claim to be a tax adviser. Tax Shrink's source code is private. The supported scenario, calculation order, configured rates and official sources are documented on the methodology and tax-rate pages.

You can select 2023/24, 2024/25, 2025/26 or 2026/27. The company calculator defaults to the latest configured year, currently 2026/27. The global options are England, Wales or Northern Ireland; and Scotland. Scottish salary uses its separate non-savings, non-dividend bands while dividends, Personal Allowance, National Insurance and Corporation Tax remain UK-wide in this model.

Choose Scotland if HMRC treats you as a Scottish taxpayer. The choice depends on the individual, not the company's address, and Scottish PAYE codes usually start with S. If you moved or have more than one home, check HMRC's guidance.

Enter the amount left after ordinary business expenses, but before director salary, employer National Insurance and Corporation Tax. This is narrower than turnover or gross revenue.

No. Enter retained profits from completed accounting periods only when the company accounts confirm they are available for dividends. A bank balance can include VAT, PAYE, Corporation Tax provisions, loans, capital, customer prepayments or working capital that is not available for distribution.

Tax Shrink does not verify the accounts or whether a dividend is legally available. It adds the amount you choose to distribute to this year's personal dividend income without charging Corporation Tax on those retained profits again. Salary and employer National Insurance remain limited by current profit. Read the prior-year reserve methodology and GOV.UK dividend guidance.

The rate follows the selected year. The 2023/24 model uses a blended 11.5% employee rate; 2024/25 through 2026/27 use 8% between the annual primary threshold and upper earnings limit, then 2%. The company model assumes a full-year director and applies no Employment Allowance unless you enter one.

Yes. The sole trader versus limited company comparison estimates what you keep from the same annual taxable profit, with no other income and all company profit withdrawn. It covers all four supported years and both Income Tax regions. The sole-trader side uses Income Tax and self-employed National Insurance; the company side uses salary and dividends.

It assumes one full-year business and an adult below State Pension age. Accountancy-fee differences, formation costs and non-tax obligations are excluded, so a higher take-home estimate is not a recommendation to incorporate. Read the full comparison assumptions.

No. It defers the personal tax rather than avoiding it. Corporation Tax is still paid on the profit this year, and taking the retained profit out later is taxed under the rules of that later year, which may differ from today's.

The target take-home mode exists because most owner-directors do not extract everything. It shows which salary and dividend combination reaches the take-home you want for the least tax this year, and how much profit stays behind. It does not compare that against extracting everything, because the two are not the same decision.

Usually not. A company cannot claim when its only employee paid above the Class 1 Secondary Threshold is also a director, which describes most single-director companies. Companies that can claim normally employ at least one other person paid above that threshold.

If your company is eligible, enter the allowance still available for the director's employer National Insurance — some may already be used by other payroll. The calculator then reduces employer National Insurance by that amount, which changes both the Corporation Tax deduction and the salary the company can afford. Tax Shrink does not decide eligibility: check the GOV.UK Employment Allowance guidance or ask your accountant.

Often little or none from the company, but compare rather than assume. Add your employment or pension income under “other income” in the company calculator: it occupies your Personal Allowance and tax bands, so company salary can attract Income Tax from the first pound plus employer National Insurance while the same profit kept in the company is taxed once at Corporation Tax. The comparison then shows the salary with the highest estimated take-home, which is frequently £0 or low for a director whose other income already exceeds about £50,270 a year.

A salary below the Lower Earnings Limit does not earn a qualifying year for the State Pension through this employment; if your other job pays above the Lower Earnings Limit you already qualify through it. See the other-income methodology and GOV.UK National Insurance guidance.

The answer changes with the size of the other job, and it moves up as well as down. See what salary a company should pay when you already have a job for worked examples.

Calculator values are not submitted to a Tax Shrink account or database. Some values and the selected region can appear in a shareable URL and browser history. The region and company amount are also stored locally in your browser. See the privacy page for analytics boundaries and deletion steps.

Email tax-shrink@bolddata.biz. Include the page, tax year, Income Tax region and steps needed to reproduce the result. Do not send unnecessary personal information. See the terms of use for the service limits.