Dividend Tax Rates 2026/27 and the £500 Allowance
Dividend tax rates for 2026/27 are 10.75%, 35.75% and 39.35% above a £500 allowance. See how they apply, with a worked example.
For 2026/27 you pay no tax on the first £500 of dividends, then 10.75% on dividends within the basic rate band, 35.75% within the higher rate band and 39.35% in the additional rate band above £125,140. The ordinary and upper dividend rates rose by two percentage points in April 2026, which has made dividends less attractive compared with salary than they used to be.
This guide explains the rates and bands, how dividends fit with your other income, how much tax you pay at different levels and how to report and pay the tax. Test your own figures with our dividend tax calculator, and for the bigger picture of how directors take pay, read our director pay guide.
Dividend tax rates for 2026/27
| Band | Taxable income | Dividend tax rate |
|---|---|---|
| Dividend allowance | First £500 of dividends | 0% |
| Basic rate | Up to £50,270 (taxable income up to £37,700) | 10.75% |
| Higher rate | £50,271 to £125,140 | 35.75% |
| Additional rate | Over £125,140 | 39.35% |
The personal allowance of £12,570 comes first and can be used against any type of income, including dividends. The £500 dividend allowance then covers the first slice of dividend income, but the allowance still counts towards your basic and higher rate bands when working out which rate applies to the rest.
Limited company accounts and tax from £249 + VAT.
See limited company packagesBook a free callHow the dividend allowance has changed
| Tax year | Dividend allowance |
|---|---|
| 2016/17 to 2017/18 | £5,000 |
| 2018/19 to 2022/23 | £2,000 |
| 2023/24 | £1,000 |
| 2024/25 onwards | £500 |
The cuts mean that even small dividends are now taxable for most people, and anyone with significant dividend income should plan for tax.
How dividends are taxed alongside other income
Dividends are treated as the top slice of your income, after earnings, rental profit and savings interest. That means your salary or other income uses up your personal allowance and fills the basic rate band first, and dividends are taxed on top at the dividend rates. A director with only a £12,570 salary will have a full basic rate band of £37,700 available for dividends.
Worked examples
Example 1: a director with a £12,570 salary
With no other income, the dividend tax at different levels of dividend is:
| Dividends taken | Dividend tax for 2026/27 |
|---|---|
| £10,000 | £1,021 |
| £30,000 | £3,171 |
| £50,000 | £8,396 |
| £70,000 | £15,546 |
For £10,000 of dividends, the first £500 is covered by the allowance and the remaining £9,500 is taxed at 10.75%, giving £1,021. For £50,000, the basic rate band covers £37,700 of dividends, with £500 of that tax free, and the remaining £12,300 is taxed at 35.75%.
Example 2: an employee with a small shareholding
An employee has £45,000 of salary and receives £10,000 of dividends. After the personal allowance, taxable income from salary is £32,430, leaving £5,270 of the basic rate band. The first £500 of dividends is covered by the allowance, £4,770 is taxed at 10.75% (about £513), and the remaining £4,730 falls into the higher rate band and is taxed at 35.75% (about £1,691). The total dividend tax is about £2,204.
Reporting and paying dividend tax
Dividend tax is not deducted at source. You report dividends on your Self Assessment return and pay the tax by 31 January following the end of the tax year. If your Self Assessment bill is over £1,000, you may have to make payments on account. See our guide to payments on account. If you have only a small amount of dividend income and your tax is under £3,000, you may be able to have it collected through your tax code instead.
Do dividends affect National Insurance and student loans?
Dividends do not attract National Insurance, but they do count towards the income used to calculate Child Benefit charges and the £100,000 personal allowance taper. They are not subject to student loan repayments through payroll, but they can increase Self Assessment repayments for people on Plan 1, 2, 4 or 5 loans if they are required to file a return and the income is above the threshold.
Ways to reduce dividend tax
- Use your ISA allowance of £20,000 to hold dividend-paying shares tax free.
- Pay into a pension, which extends your basic rate band and can bring income below the higher rate threshold.
- Use your spouse’s allowance and basic rate band if they own shares in the company.
- Consider keeping some profit in the company and paying dividends in a later year.
- Use employer pension contributions rather than dividends where you do not need the cash.
Dividend tax for London directors and investors
London directors and contractors who take dividends from their companies often have higher profits, so more of their dividends fall into the 35.75% band. Planning when you take dividends, using pension contributions and splitting ownership with a spouse can reduce tax materially. We help company owners across every borough, including Camden, Wandsworth and Hounslow. See our director tax planning service.
Common dividend tax mistakes
- Not setting aside money for the Self Assessment bill.
- Forgetting to report dividends because no tax was deducted.
- Ignoring the effect of dividends on the personal allowance taper and Child Benefit charge.
- Paying dividends without enough profit in the company.
Dividends and the £100,000 and £60,000 thresholds
Dividends count towards your adjusted net income, so large dividends can reduce your personal allowance between £100,000 and £125,140 and trigger the High Income Child Benefit Charge from £60,000. If a dividend would take you over one of these thresholds, a pension contribution or Gift Aid donation can bring adjusted net income back down. Planning this in the tax year can save far more than the headline dividend rates suggest.
Planning dividends through the year
Directors do not need to take dividends in one lump sum. Many take regular amounts, for example monthly or quarterly, once the company has enough profit, and declare a final dividend after the year-end accounts. The key points are that every dividend is supported by profits, approved in minutes and recorded with a voucher. Regular dividends make personal budgeting easier, while the bigger decisions, such as how much profit to leave in the company, are best made with your accountant before the tax year ends on 5 April.
Paying dividends to a spouse
If a spouse is a genuine shareholder, dividends paid to them are taxed on them, which can use their personal allowance, dividend allowance and basic rate band. HMRC can challenge arrangements where the shareholding is not real or the spouse does no work and has no genuine ownership, so any structure should be set up with advice and documented properly.
As a rule of thumb, always estimate your dividend tax before you declare a dividend, and put the tax aside as you go, so the January payment never comes as a surprise.
Frequently asked questions
What are the dividend tax rates for 2026/27?
10.75% for basic rate taxpayers, 35.75% for higher rate taxpayers and 39.35% for additional rate taxpayers, after a £500 allowance.
Do I pay dividend tax if I am a basic rate taxpayer?
Yes, at 10.75% on dividends above the £500 allowance.
When do I pay tax on dividends?
By 31 January after the tax year ends, through your Self Assessment return.
Are dividends taxed in Scotland differently?
No. Dividends are taxed at the same UK-wide rates, even though other income is taxed at Scottish rates.
Are dividends in an ISA taxable?
No. Dividends from investments held inside an ISA are free of dividend tax.
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