2026/27 dividend tax rates
| Band | Taxable Income Range | Dividend Rate |
|---|---|---|
| Dividend allowance | First £500 of dividends | 0% |
| Basic rate | £12,571 to £50,270 | 10.75% |
| Higher rate | £50,271 to £125,140 | 35.75% |
| Additional rate | Over £125,140 | 39.35% |
How dividend tax works
Dividends are taxed differently from salary and other earned income. They sit on top of your other income when working out which tax band applies, and they have their own set of rates.
Step 1: use your dividend allowance
The first £500 of dividend income is tax-free in 2026/27. This applies regardless of your tax band. The allowance was £1,000 in 2023/24 and £2,000 before that.
Step 2: stack dividends on top of other income
Your salary and other taxable income determines where your dividends start in the tax bands. If your salary already takes you into the higher rate band, your dividends will be taxed at 35.75% from the start (after the allowance).
Step 3: apply the dividend tax rates
Dividends that fall within the basic rate band (up to £50,270 total income) are taxed at 10.75%. Dividends in the higher rate band (up to £125,140) are taxed at 35.75%. Anything above that is taxed at 39.35%.
Why are dividend tax rates lower?
Dividends are paid from company profits that have already been subject to Corporation Tax. The lower rates partly compensate for this double taxation. Company directors often use a combination of low salary and dividends to minimise the overall tax burden, since dividends also avoid National Insurance contributions.
Personal allowance tapering
If your total income (including dividends) exceeds £100,000, your personal allowance is reduced by £1 for every £2 over that threshold. It is fully withdrawn at £125,140. This calculator lets you adjust the personal allowance to reflect tapering.
Worked examples for 2026/27
Each example below was run through the calculator above with the inputs shown. All three assume a full £12,570 personal allowance, no savings interest, and no pension contributions or Gift Aid that would widen the basic rate band.
Director: £12,570 salary and £40,000 of dividends
The salary uses the whole personal allowance, so every pound of dividend is taxable. The basic rate band is £37,700 wide. The first £500 of it is taxed at 0% under the dividend allowance, the next £37,200 at 10.75% (£3,999.00), and the last £2,300 of dividends spill into the higher rate band at 35.75% (£822.25). Total dividend tax: £4,821.25. Corporation Tax the company paid on its profits before declaring the dividend is a separate bill and is not included.
Employee: £45,000 salary and £6,000 of share dividends outside an ISA
The salary fills £32,430 of the basic rate band (£45,000 less the £12,570 allowance), leaving £5,270 of room. The dividend allowance takes the first £500 of that room, £4,770 is taxed at 10.75% (£512.78), and the remaining £730 is taxed at 35.75% (£260.97). Total: £773.75. The £730 lands in the higher rate band because the allowance still uses up band space, a point many people miss.
Retired: £20,000 pension income and £2,000 of dividends
Everything sits in the basic rate band. £500 is covered by the allowance and £1,500 is taxed at 10.75%, giving £161.25. With dividends under £10,000 and no tax return, this can be collected through the pension tax code if HMRC is told after 5 April 2027 and before 5 October 2027.
Rules that change the answer
The rates rose on 6 April 2026
The basic and higher dividend rates each went up by 2 percentage points, to 10.75% and 35.75%. The additional rate stayed at 39.35%. The allowance has been £500 since 2024/25; it was £1,000 in 2023/24. If you are checking an older year, this calculator will overstate the tax because it uses 2026/27 rates (HMRC rates and allowances, current and past, checked 30 October 2026).
Scotland uses the same dividend rates
Scottish Income Tax applies to wages and pensions. Dividends and savings interest are taxed at the UK rates shown on this page, so a Scottish taxpayer can use this calculator for the dividend part of their bill (GOV.UK: Scottish Income Tax, checked 30 October 2026).
ISAs, the allowance and reporting
Dividends from shares held in an ISA are tax-free and should be left out of the dividend box. Dividends covered by unused personal allowance or the £500 allowance need no action. Above that, dividends up to £10,000 can be reported through a tax code change or the HMRC helpline by 5 October after the tax year ends; over £10,000 you must file a Self Assessment return (GOV.UK: Tax on dividends, checked 30 October 2026).
Income over £100,000
Dividends count towards adjusted net income. Once total income passes £100,000, the personal allowance falls by £1 for every £2 over, so a large dividend can cost you allowance as well as dividend tax. Enter the reduced allowance in the third box to see the effect.
Common mistakes
Treating the £500 as a deduction. It is a 0% band. Your dividends still count in full when working out which band the rest falls into, as the second example shows.
Entering salary before workplace pension contributions. If your employer takes pension contributions before tax, enter your pay after them, which is the taxable pay figure on your payslip.
Assuming dividends are always taxed. With no other income, the personal allowance covers the first £12,570 of dividends and the dividend allowance the next £500. On £20,000 of dividends and nothing else, the calculator shows £744.98 of tax.
How this calculator works: it takes your other taxable income first, applies the personal allowance you enter, then stacks dividends on top: £500 at 0%, then 10.75%, 35.75% and 39.35% across the 2026/27 bands. Rates were last checked against GOV.UK on 30 October 2026. Every source is listed on our methodology page.