Dividends sit on top of your other income. After the £500 allowance, they are taxed at 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% above £125,140.
What changed in April 2026
The basic and higher dividend tax rates both rose by two percentage points. The additional rate stayed the same.
Worked example
See it with real numbers
With £12,570 of salary and £40,000 of dividends, the £500 allowance is tax-free, £37,200 is taxed at 10.75% and £2,300 at 35.75%, a total of about £4,821.