UK Dividend Tax
UK Dividend Tax 2026/27
How much UK dividend tax will you pay? See the latest dividend tax rates, the £500 Dividend Allowance and how dividends are taxed for company directors, shareholders and investors.
The Dividend Allowance remains £500 for the 2026/27 tax year.
How Much Is UK Dividend Tax?
For the 2026/27 tax year, the UK Dividend Allowance is £500. Dividend income above your available allowances is taxed at 10.75% for basic rate taxpayers, 35.75% for higher rate taxpayers and 39.35% for additional rate taxpayers. The rate you actually pay depends on your total taxable income because dividends sit on top of your other income when your tax is calculated.
2026/27
dividend tax
dividend tax
dividend tax
What Is UK Dividend Tax?
UK dividend tax is Income Tax charged on dividend income received by shareholders. Dividends may come from shares in your own limited company, shares in other UK companies or investments such as certain funds.
You do not automatically pay tax on every dividend you receive. Dividends covered by your unused Personal Allowance or the £500 Dividend Allowance can be received without additional dividend tax. Dividends held within an ISA are also generally free from UK Income Tax.
Dividend income above your available allowances is taxed according to the Income Tax band into which the dividend falls. This means two people receiving exactly the same dividend can have very different dividend tax bills if their other income is different.
UK Dividend Tax Rates 2026/27
The dividend tax rates changed from 6 April 2026. The ordinary and upper dividend rates increased by two percentage points, while the additional dividend rate remained unchanged.
| Income Tax band | 2025/26 rate | 2026/27 rate | Change |
|---|---|---|---|
| Basic rate | 8.75% | 10.75% | +2 percentage points |
| Higher rate | 33.75% | 35.75% | +2 percentage points |
| Additional rate | 39.35% | 39.35% | No change |
Important: the dividend tax rates apply only to the taxable part of your dividend income. They do not mean that all of your dividends are automatically taxed at your highest rate.
What Is the Dividend Allowance for 2026/27?
The UK Dividend Allowance for 2026/27 is £500. This means the first £500 of dividend income falling within the allowance is taxed at 0%.
The Dividend Allowance is separate from the standard Personal Allowance, which is £12,570 for 2026/27. If you have unused Personal Allowance, dividend income can also fall within it.
Don't confuse a 0% rate with ignoring the income. Dividend income covered by the Dividend Allowance still forms part of your income when determining which tax bands your other dividends fall into.
How Is Dividend Tax Calculated?
Dividend tax is calculated by considering your income in a particular order. Your dividends are normally treated as the top slice of your income, after non-savings income and savings income.
Dividend Tax Example for 2026/27
Suppose a shareholder receives a salary of £30,000 and dividends of £30,000 during 2026/27.
Assuming the standard £12,570 Personal Allowance is available, the salary uses £17,430 of the £37,700 basic-rate band. This leaves £20,270 of the basic-rate band available.
The £500 Dividend Allowance occupies part of that remaining basic-rate band, leaving £19,770 of taxable dividends at the 10.75% basic dividend rate.
The remaining £9,730 of dividends falls into the higher-rate band and is taxed at 35.75%.
£19,770 × 10.75% = £2,125.28
£9,730 × 35.75% = £3,478.48
Total dividend tax: approximately £5,603.75
This is a simplified example. Your actual liability can change where you have other income, benefits, pension contributions, Gift Aid, a reduced Personal Allowance or other tax adjustments.
Dividend Tax for Limited Company Directors
UK dividend tax is particularly important for limited company directors and shareholders who take part of their income as dividends.
A limited company can only pay dividends from profits legally available for distribution. Dividends are paid from post-Corporation Tax profits and, unlike salary, are not normally a deductible business expense when calculating the company's Corporation Tax.
Dividends are also not normally subject to employee or employer National Insurance. However, this does not automatically mean that taking more dividends is always the most tax-efficient option. Salary levels, Corporation Tax, employer National Insurance, pension contributions, personal tax bands and the company's available profits should be considered together.
| Feature | Salary | Dividend |
|---|---|---|
| Paid through payroll | Yes | No |
| Potential employee NIC | Yes | No |
| Potential employer NIC | Yes | No |
| Corporation Tax deduction | Generally yes | No |
| Requires distributable profits | No | Yes |
| Dividend tax applies | No | Potentially |
For more detail about when directors can take dividends, see our guide to how often you can take dividends from a limited company .
Do You Pay National Insurance on Dividends?
No. Dividends are not normally subject to National Insurance Contributions. This is one of the main differences between dividend income and salary.
However, dividends are paid from company profits after Corporation Tax, whereas qualifying salary costs are generally deductible when calculating company profits for Corporation Tax purposes. Director remuneration therefore needs to be considered as a whole rather than comparing the personal tax rates alone.
Do Dividends Count Towards the £100,000 Income Limit?
Yes. Dividend income can contribute to your adjusted net income. This matters because the Personal Allowance starts to reduce when adjusted net income exceeds £100,000.
The Personal Allowance is reduced by £1 for every £2 of adjusted net income above £100,000 and can be completely lost once income reaches £125,140. Dividend planning can therefore become particularly important for shareholders whose total income is around these levels.
How Do I Report Dividend Income to HMRC?
If your dividends create a tax liability, the way you report and pay the tax depends on the amount of dividend income and your circumstances. HMRC may be able to collect relatively small liabilities by adjusting a PAYE tax code, while larger amounts may need to be reported through Self Assessment.
If you are required to submit a tax return, dividend income should be included on your Self Assessment tax return for the relevant tax year.
Need help completing your return? See our Self Assessment tax return filing service .
Can You Reduce UK Dividend Tax?
There are legitimate ways to organise investments and remuneration tax-efficiently, although the appropriate approach depends on your circumstances.
- Use your available £500 Dividend Allowance.
- Make use of any available Personal Allowance.
- Consider tax-free investment wrappers such as ISAs where appropriate.
- Consider pension contributions as part of wider tax planning.
- Plan the timing of dividends around tax years and tax bands.
- For company owners, review salary, dividends and pension contributions together.
- Consider genuine spouse or civil-partner share ownership where commercially and legally appropriate.
- Ensure dividends are supported by sufficient distributable company profits.
Director tip: the most tax-efficient salary and dividend combination is not necessarily the same for every company director. Corporation Tax, National Insurance, other income, available allowances and pension planning can all affect the calculation.
Can a Husband and Wife Both Use the Dividend Allowance?
Yes. Each individual has their own Dividend Allowance. Where spouses or civil partners genuinely own shares and are entitled to the associated dividends, each person's dividend income is considered separately for tax.
Share ownership should reflect the genuine legal and beneficial ownership of the shares. Company owners considering changes to shareholdings should obtain advice before transferring or issuing shares purely for tax purposes.
Do You Pay Tax on Dividends in an ISA?
Dividends arising on investments held within an Individual Savings Account (ISA) are generally free from UK Income Tax. They do not use your £500 Dividend Allowance.
This can make an ISA particularly valuable for investors who expect to receive significant dividend income from shares or investment funds.
UK Dividend Tax FAQs
What is the UK dividend tax rate for 2026/27?
For 2026/27, taxable dividends are charged at 10.75% where they fall within the basic-rate band, 35.75% within the higher-rate band and 39.35% within the additional-rate band.
How much dividend can I receive tax-free in 2026/27?
The Dividend Allowance is £500 for 2026/27. Dividend income may also be covered by any unused Personal Allowance you have.
Did dividend tax increase in April 2026?
Yes. From 6 April 2026 the basic dividend rate increased from 8.75% to 10.75% and the higher dividend rate increased from 33.75% to 35.75%. The additional dividend rate remained at 39.35%.
Do dividends count as income?
Yes. Dividend income forms part of your income for Income Tax purposes and can affect the tax band into which your dividends and other income fall.
Are dividends taxed before or after salary?
Dividends are generally treated as the top slice of your income. Your other taxable income therefore affects the rate of tax payable on your dividends.
Do I pay National Insurance on dividends?
No. Dividend income is not normally subject to employee or employer National Insurance Contributions.
Can a limited company pay dividends every month?
A company can pay dividends at different times during the year, including monthly, provided sufficient distributable profits are available and the appropriate company procedures and records are maintained.
Are dividends from an ISA taxable?
No UK Income Tax is normally payable on dividend income arising from investments held within an ISA.
Do I need to declare dividends to HMRC?
You may need to tell HMRC where your dividend income exceeds your available tax-free allowances or creates a tax liability. The method used depends on the amount involved and whether you already complete Self Assessment.
UK Dividend Tax Planning for Company Directors
For owner-managed limited companies, dividend tax should not be considered in isolation. The overall tax cost can depend on your salary, company profits, Corporation Tax, employer National Insurance, pension contributions, other personal income and the timing of dividends.
At The Online Accountants, we help limited company directors understand how much they can legally distribute, calculate their personal dividend tax liabilities and consider salary and dividend strategies as part of their wider tax position.
Need Help With Dividend Tax?
We are ACCA qualified online accountants specialising in owner-managed limited companies. We can help with dividend planning, company accounts, Corporation Tax and Self Assessment throughout the UK.
Speak to an Accountant View Our Fixed FeesTax rules and individual circumstances can change. This guide provides general information and should not be treated as personalised tax advice.