UK Dividend Tax Calculator
Calculate your UK dividend tax for 2026/27 (10.75% / 35.75% / 39.35%) or earlier years (8.75% / 33.75% / 39.35%). Basic and higher rates rose 2pp on 6 April 2026 — enter your dividend and other income to see the new bands, your effective rate, and the full breakdown.
Employment, self-employment, or pension income
Dividend Tax
£1,021.25
Effective rate: 10.21%
Dividend Allowance
£500
Tax-free each year
Taxable Dividends
£9,500
After allowance
| Band | Rate | Dividends in Band | Tax |
|---|---|---|---|
| Basic rate (10.75%) | 10.75% | £9,500 | £1,021.25 |
| Total | £9,500 | £1,021.25 | |
How does 2026-27 compare to last year?
See what changed in thresholds, rates, and your take-home pay
How UK dividend tax works
Dividend income is taxed separately from — and at lower rates than — salary or self-employment income, but it is not taxed in isolation. HMRC treats dividends as the "top slice" of your income: your Personal Allowance and all your non-dividend income fill the tax bands first, and your dividends are then taxed in whatever band is left. The first £500 of dividends is covered by the Dividend Allowance and taxed at 0%, after which the basic, higher, and additional dividend rates apply.
Dividend rates are lower than income tax rates for a reason: the company has already paid Corporation Tax (19% to 25%) on the profits before distributing them. The lower personal rate is a partial offset for that earlier layer of tax — not a loophole. The Dividend Allowance has also been cut hard, from £2,000 (to 2022/23) to £1,000 (2023/24) to £500 today, pulling many more small shareholders into Self Assessment.
Dividend rates rose on 6 April 2026
The Autumn Budget 2025 raised the basic and higher dividend rates by 2 percentage points from 6 April 2026. The additional rate was left unchanged. The £500 allowance and the income bands were not changed by this measure.
| Band | 2024/25 & 2025/26 | 2026/27 | Change |
|---|---|---|---|
| Basic rate | 8.75% | 10.75% | +2.0 pp |
| Higher rate | 33.75% | 35.75% | +2.0 pp |
| Additional rate | 39.35% | 39.35% | no change |
| Dividend allowance | £500 | £500 | no change |
Worked examples (2026/27 rates)
Basic-rate investor — £30,000 salary + £3,000 dividends
- Total income £33,000 is below the £50,270 higher-rate threshold, so dividends stay in the basic band.
- First £500 of dividends: tax-free (dividend allowance).
- Remaining £2,500 × 10.75% = £268.75 dividend tax.
Company director — £12,570 salary + £50,000 dividends
- Salary equals the Personal Allowance, so no income tax on salary.
- £500 dividends tax-free; £37,200 fills the rest of the basic band at 10.75% = £3,999.00.
- The final £12,300 falls in the higher band at 35.75% = £4,397.25.
- Total dividend tax: £8,396.25.
- At the old 2025/26 rates this was £7,406.25 — the 2026 rise costs this director about £990.
Taking dividends from your own company
For company directors and contractors, the salary-versus-dividend mix is the central planning decision. Dividends carry no National Insurance, which is why they have traditionally beaten salary for owner-managers. But the picture is more balanced than it looks: salary is deductible against Corporation Tax, whereas dividends are paid from profit that has already been taxed at 19% (small profits) up to 25% (main rate, with marginal relief between £50,000 and £250,000).
The common structure is a salary up to the National Insurance threshold (keeping a qualifying year for the State Pension) topped up with dividends. The 2026 dividend rate rise narrows the advantage of dividends slightly, so it is worth re-running the numbers each year. Model your own split with the take-home pay calculator, the Corporation Tax calculator, and the income tax calculator.
Watch the allowance and the £100,000 trap
The £500 Dividend Allowance is a 0% rate, not a deduction — a subtle but costly distinction. The £500 still uses up part of whichever band it sits in, so for someone near the £50,270 threshold the allowance can push the rest of their dividends into the higher band even though the £500 itself is tax-free.
Because dividends are the top slice of income, they can also tip your total income over £100,000, where the Personal Allowance is withdrawn by £1 for every £2 above the threshold and disappears entirely at £125,140. Across that band the effective marginal rate is far higher than the headline dividend rate. A pension contribution reduces your adjusted net income and can claw the allowance back — one of the few levers that works here.
Legal ways to reduce dividend tax
Use a Stocks & Shares ISA
Dividends inside an ISA are entirely tax-free and ignore the £500 allowance. A "Bed and ISA" moves existing holdings into the ISA wrapper, within the £20,000 annual limit.
Hold funds in a pension
Dividends inside a SIPP or workplace pension are tax-free, and contributions also cut your adjusted net income — useful around the £100,000 and £50,270 thresholds.
Use both spouses' allowances
Transferring income-producing shares to a lower-rate spouse uses their £500 allowance and lower band. The transfer must be a genuine outright gift.
Time dividends across tax years
Owner-managers can choose when to declare dividends, spreading them across two tax years to use two £500 allowances and avoid bunching income into the higher band.
Frequently asked questions
What is the UK Dividend Allowance?
The Dividend Allowance is £500 for 2026/27, 2025/26 and 2024/25. The first £500 of dividend income each year is tax-free regardless of your other income or tax band. It was £1,000 in 2023/24 and £2,000 up to 2022/23 — it has been cut sharply in recent years, so more small investors now pay dividend tax.
What are the UK dividend tax rates?
From 6 April 2026 (2026/27 tax year) the rates are 10.75% (basic), 35.75% (higher), and 39.35% (additional). For 2025/26 and 2024/25 they were 8.75%, 33.75%, and 39.35%. The basic and higher rates rose 2 percentage points in the Autumn Budget 2025; the additional rate was unchanged. Dividend rates sit below the equivalent income tax rates because dividends are paid from company profits that have already borne Corporation Tax.
How does other income affect dividend tax?
Dividends are treated as the 'top slice' of your income. Your Personal Allowance and other income (such as employment or self-employment earnings) fill the tax bands first. Dividends are then taxed in whatever band they fall into after other income. So if your salary already fills the basic-rate band, your dividends are taxed at the higher dividend rate.
Does the £500 allowance use up part of my tax band?
Yes — this catches people out. The dividend allowance is a 0% rate, not a deduction. The £500 still uses up part of whichever band it falls in. If you are near the £50,270 higher-rate threshold, the allowance can nudge the rest of your dividends into the higher band even though it is itself tax-free.
How much tax will I pay on £10,000 of dividends?
It depends on your other income. If your salary already uses your Personal Allowance and fills the basic-rate band, £10,000 of dividends in 2026/27 costs (£10,000 − £500) × 35.75% = £3,397.50 at the higher rate. If you are a basic-rate taxpayer with room in the band, the same dividends cost £9,500 × 10.75% = £1,021.25. Enter your figures above for the exact amount.
Are dividends better than salary from my own company?
Often, but not always. Dividends carry no National Insurance, while salary does — but salary is deductible against Corporation Tax and dividends are not (they come from post-Corporation-Tax profit). The usual approach is a modest salary up to the NI threshold plus dividends, but the 2026 dividend rate rise and the 19%–25% Corporation Tax range narrow the gap. Model both with the take-home and Corporation Tax calculators.
Do I pay dividend tax on shares held in an ISA?
No. Dividends from shares or funds held inside a Stocks & Shares ISA are completely tax-free and do not count toward your £500 allowance. Moving dividend-paying investments into an ISA (a 'Bed and ISA') is the most common way to remove dividend tax entirely, within the £20,000 annual ISA limit.
How do I report and pay dividend tax?
If your dividends are between £500 and £10,000, you can ask HMRC to change your tax code or report via Self Assessment. Above £10,000 you must file a Self Assessment return. Dividends inside pensions and ISAs are not reported. Keep dividend vouchers showing the amount and payment date.
What if my dividends push me over £100,000?
Because dividends are the top slice of income, they can push total income above £100,000, where the Personal Allowance is withdrawn by £1 for every £2 over the threshold — fully gone at £125,140. This creates an effective marginal rate far above the headline dividend rate on income in that band. Pension contributions can restore the allowance by reducing adjusted net income.
Sources
Related Calculators
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