In 2026/27 you can receive £500 of dividends before paying tax, and the rest is taxed at 10.75%, 35.75% or 39.35% depending on your income. Dividends sit on top of your other income, so your salary decides which rate applies.
The 2026/27 rates and allowance
| Item | 2025/26 | 2026/27 |
|---|---|---|
| Dividend allowance | £500 | £500 |
| Ordinary (basic) rate | 8.75% | 10.75% |
| Upper (higher) rate | 33.75% | 35.75% |
| Additional rate | 39.35% | 39.35% |
The ordinary and upper rates rose from 6 April 2026. The additional rate did not change. These rates apply to dividends from shares held outside an ISA, whether you receive them as an investor or from your own company. Dividends inside an ISA are tax-free. Check GOV.UK for the latest figures.
How dividends are stacked on other income
HMRC adds up your income in a fixed order: income such as salary and profits first, then savings interest, and dividends last. The Personal Allowance of £12,570 is used against the earlier layers first, and it is reduced by £1 for every £2 of total income over £100,000.
In England, Wales and Northern Ireland the bands apply to taxable income: basic rate up to £37,700, higher rate up to £125,140 and additional rate above. A dividend is taxed at the rate for the band it falls in. Where a single payment crosses a boundary, the part below is taxed at the lower rate and the part above at the higher rate.
The dividend allowance is a 0% band, not a deduction. Covered dividends still use up part of your band, which can push other dividends into a higher rate.
Worked example: modest salary
You earn £30,000 and receive £8,000 of dividends.
- Personal Allowance covers the first £12,570 of salary, so £17,430 of salary is taxable: £3,486 income tax
- The first £500 of dividends is at 0%
- The other £7,500 is at 10.75% (still inside the basic-rate band): £806.25
- Dividend tax is about 10.1% of the dividends; total income tax is £4,292.25
Worked example: higher earner
You earn £60,000 and receive £20,000 of dividends.
- Income tax on the salary: £11,432
- Dividends are above £50,270 in total income, so they fall in the higher band
- After the £500 allowance, £19,500 is taxed at 35.75%: £6,971.25, about 34.9% of the dividends
Dividends from your own company
Company directors often take a modest salary and the rest as dividends. The salary uses up the Personal Allowance and sets how much of the basic-rate band is left, so it changes the rate on the dividends. Dividends come from profits that have already borne corporation tax, and they are not a business expense. The tax on them falls on you personally, and it is normally settled through Self Assessment rather than payroll. Because the bill arrives after the year ends, many people move a share of each dividend to a separate account as soon as it is paid. Work out your likely total income first, then test a few dividend amounts to see where the rate steps up.
Savings interest
Savings interest is taxed before dividends. A starting rate for savings of up to £5,000 is available if your other income is low, and the personal savings allowance is £1,000 for basic-rate taxpayers, £500 for higher-rate and nothing for additional-rate. Savings rates are due to change from April 2027, so check GOV.UK.
Scotland
Dividends in Scotland use the same dividend rates, but Scottish income tax bands apply to your other income. The calculator models only the England, Wales and Northern Ireland bands, so Scottish taxpayers should treat the result as a guide.
Reporting dividends
Dividend tax is not normally collected at source. Many people with dividends above the allowance report them through Self Assessment, and check GOV.UK for when that applies. If you are a company director taking dividends, set tax aside as you go. See UK income tax explained: bands, allowance and how it's worked out for how bands and the allowance work and National Insurance for employees: what you pay and why for why dividends do not attract National Insurance, unlike salary.
Note: This is general information, not tax advice. Rates change, so check GOV.UK for your situation.
Try the calculator
Use the Dividend tax calculator with your salary and dividends to see the tax at each rate, and the Self-employed tax and National Insurance calculator if you also have self-employed profit.
Open the free Dividend tax calculator
Worked example 3: dividends that cross the higher-rate line
You earn £45,000 and receive £15,000 of dividends in 2026/27 (England, Wales or Northern Ireland). Using the dividend tax calculator:
- Salary after the £12,570 Personal Allowance: £32,430, taxed at 20%, which is £6,486
- That leaves £5,270 of the £37,700 basic-rate band. The £500 dividend allowance sits in that band at 0%, so £4,770 is taxed at 10.75%: £512.78
- The remaining £9,730 falls into the higher-rate band and is taxed at 35.75%: £3,478.48
- Dividend tax is £3,991.25, which is 26.6% of the dividends. With the salary tax, total income tax is £10,477.25
Note how one payment is split between two rates. The same dividends on a lower salary would have been taxed far more lightly, which is why it pays to look at your total income before choosing when to take a dividend.
Worked example 4: low salary and dividends up to the allowance
Suppose your salary is £12,570 and you receive £20,000 of dividends. The salary uses up the Personal Allowance, so there is no income tax on it. The first £500 of dividends is at 0%, and the other £19,500 is taxed at 10.75%, which is £2,096.25 (about 10.5% of the dividends). All of it falls inside the basic-rate band, so there is no 35.75% charge.
| Salary | Dividends | Dividend tax | Share of dividends |
|---|---|---|---|
| £12,570 | £20,000 | £2,096.25 | 10.5% |
| £30,000 | £8,000 | £806.25 | 10.1% |
| £45,000 | £15,000 | £3,991.25 | 26.6% |
| £60,000 | £20,000 | £6,971.25 | 34.9% |
The pattern is clear: the share you pay depends on how much of the dividend falls in each band, not on the size of the dividend alone.
Step by step: working out your dividend tax by hand
- Add up your non-dividend income for the year (salary, profits, pensions).
- Subtract the Personal Allowance (£12,570, less £1 for every £2 above £100,000 of adjusted income).
- Work out how much of the £37,700 basic-rate band your other income uses.
- Lay your dividends on top. The first £500 is at 0% but still uses up band.
- Tax the dividends in the basic-rate band at 10.75% and those above it at 35.75% (39.35% above £125,140 of taxable income).
- Add this to the income tax on your other income for the total.
Planning around the thresholds
Three points on the income ladder matter most for dividends. The first is the Personal Allowance, which is worth using in full if you can, because income below it is not taxed at all. The second is the top of the basic-rate band, where the dividend rate jumps from 10.75% to 35.75%. The third is £100,000 of income, above which the Personal Allowance starts to reduce.
Practical steps people take, all of which you should check against your own circumstances:
- Spread dividends across tax years so that less of each falls above the higher-rate line.
- Where a spouse or partner has lower income, consider whether shares held in their name make sense. Gifts between spouses and civil partners have their own rules, and the income taxes of the owner apply, so take advice before moving shares.
- Hold investments you expect to produce dividends inside an ISA or pension where it suits your plans.
- Keep a record of every dividend, the date paid and the company, since your tax return will ask for the totals.
The Self-employed tax explained: income tax, National Insurance and payments on account guide covers the other income you might report alongside dividends, and Self Assessment deadlines apply to both.
Common mistakes
- Treating the £500 allowance as a deduction. It is a 0% band, and it still counts towards the band limit.
- Forgetting that dividends come last. They are taxed above your salary, so they take the highest rate on offer.
- Ignoring the 2026/27 rate rise. The ordinary and upper rates went up on 6 April 2026, so figures from last year are out of date.
- Forgetting the Personal Allowance taper. It starts at £100,000, which affects the tax on dividends at that level.
- Not setting money aside. The tax usually falls due after the year ends, so spending the whole dividend can leave you short.
Dividends, ISAs and wrappers
Dividends from shares held inside an ISA are free of dividend tax and do not use the allowance, so for investors with large holdings it is worth looking at how much sits inside a wrapper. Pension funds also shelter dividends while they stay inside. Capital gains tax explained: rates, allowance and how to work it out explains the other tax on shares, which is charged when you sell for a profit, not when you receive an income. Taxes on the pension side are covered in Net pay, salary sacrifice or relief at source: how pension contributions affect your pay.
Glossary
- Dividend: a share of a company’s profit paid to its shareholders.
- Dividend allowance: £500 a year taxed at 0%.
- Ordinary rate: the 10.75% dividend rate for basic-rate taxpayers.
- Upper rate: the 35.75% dividend rate for higher-rate taxpayers.
- Additional rate: the 39.35% rate on the top slice of income.
- Self Assessment: the HMRC system for reporting income that is not taxed at source.
When to check with an official source
Rates and thresholds can change, and your own position may involve other income, Scottish bands or company structures. GOV.UK has the current rates, and an accountant can help with dividends from your own company.
Frequently asked questions
Do I pay National Insurance on dividends?
No. National Insurance is charged on earnings and self-employed profits, not on dividends.
Is the dividend allowance reset each year?
Yes. It applies to each tax year, and unused allowance cannot be carried forward.
Are dividends in an ISA taxed?
No. Dividends inside an ISA are tax-free and do not use your dividend allowance.
Does my salary affect my dividend rate?
Yes. Dividends sit on top of your other income, so a higher salary pushes more of them into the higher rate.
When do I have to pay tax on dividends?
Usually through Self Assessment, with payment due after the end of the tax year. Check GOV.UK for the dates that apply to you.
Can I use the dividend allowance if I earn more than £100,000?
Yes. It does not depend on income, though the Personal Allowance reduces above £100,000, so more of your income is taxed.
Do dividends from overseas shares count?
Generally yes, but foreign tax and reliefs can complicate it. Check GOV.UK or take advice.
Is the £500 allowance per person?
Yes. Each person has their own allowance, so a couple can each use theirs on dividends in their own names.