Dividend Tax Rates 2026/27 Calculator

Dividend tax rates for 2026/27

The first £500 of dividends is tax-free under the dividend allowance. Dividends above that are taxed at these rates, which sit on top of your other income for 2026/27.

Use the dividend tax calculator

Enter your non-dividend income (usually salary or pension) and your total dividends for the year into the tool above. It applies the £500 dividend allowance, stacks the dividends on top of your other income, and splits them across the basic, higher and additional rate bands to give you the tax owed for 2026/27.

How dividend tax is worked out

Dividends are the top slice of your income. HMRC taxes your earnings and savings first, then your dividends, so the band your dividends land in depends on everything else you earn. The plain-English formula is:

Taxable dividends = total dividends − £500 dividend allowance. The remaining amount is then taxed at the dividend rate for whichever band it falls into.

The £500 dividend allowance is taxed at 0%, but it still uses up part of your tax band. After that, the 2026/27 dividend rates are 10.75% within the basic rate band, 35.75% in the higher rate band and 39.35% above the additional rate threshold. These ordinary and upper rates rose by two percentage points for 2026/27 (they were 8.75% and 33.75%), so a payout that cost you a certain amount last year now costs more.

The bands themselves run on taxable income: the basic rate band covers the first £37,700 of taxable income, the higher rate band runs from there to £125,140, and anything above that is additional rate. Your Personal Allowance of £12,570 is set against your income in order, normally soaking up salary or pension before any dividends are reached. If your total income tops £100,000, the Personal Allowance tapers away by £1 for every £2 over that line, which can quietly push more of your dividends into a higher band. You can model your wider position with our income tax calculator and see how salary and dividends combine.

One point that catches people out: dividends are taxed at the same UK-wide rates everywhere, including Scotland. Scotland sets its own rates only for non-savings, non-dividend income, so a Scottish taxpayer uses the Scottish bands for salary but the rates above for dividends.

Worked examples for 2026/27

Numbers make this clearer than any rule. Here are three common situations, with the maths shown step by step.

Example 1 - Director on a £12,570 salary plus £40,000 dividends

A limited company director pays themselves a £12,570 salary, which exactly uses the £12,570 Personal Allowance, leaving £0 of taxable salary. The £40,000 of dividends becomes the taxable income.

• First £500 covered by the dividend allowance: taxed at 0%.
• Next £37,200 (from £500 up to the £37,700 basic rate band top) at 10.75% = £3,999.00.
• Remaining £2,300 (from £37,700 to £40,000) at 35.75% = £822.25.

Total dividend tax = £4,821.25. Notice how part of the payout tips into the higher rate band, where the rate more than triples.

Example 2 - Freelancer taking £12,570 salary plus £20,000 dividends

A designer running her own company takes the same £12,570 salary and £20,000 in dividends. The salary uses the Personal Allowance, so the dividends are the taxable income.

• First £500 at 0% under the dividend allowance.
• Remaining £19,500 sits inside the basic rate band, taxed at 10.75% = £2,096.25.

Total dividend tax = £2,096.25. Because nothing reaches the higher rate band, the whole payout stays at the lower dividend rate.

Example 3 - Employee on £60,000 with £10,000 of share dividends

Someone employed on a £60,000 salary also holds shares paying £10,000 in dividends. After the £12,570 Personal Allowance, their taxable salary is £47,430, which already fills the £37,700 basic rate band and runs into the higher rate band. Every dividend therefore lands in the higher band.

• First £500 at 0% under the dividend allowance.
• Remaining £9,500 at 35.75% = £3,396.25.

Total dividend tax = £3,396.25. Here the salary alone has used up the basic rate band, so there is no 10.75% slice at all.

2026/27 dividend rates and thresholds

These are the figures used above, checked against gov.uk for the 2026/27 tax year. The full details are on the official gov.uk guide to tax on dividends.

How to reduce the tax on your dividends

There are legitimate ways to keep more of what your shares pay, and they are worth planning before the tax year ends rather than after.

• Use your ISA. Dividends paid on shares held inside a Stocks and Shares ISA are completely tax-free and do not use your dividend allowance. The annual ISA limit is £20,000.
• Split shares with a spouse or civil partner. Each person has their own £500 dividend allowance and their own tax bands, so sensibly held joint or transferred shareholdings can use two sets of allowances.
• Mind the band edges. If a payout would push you just over the higher rate threshold, deferring part of it to the next tax year can keep it at 10.75% rather than 35.75%.
• Balance salary and dividends. Company owners often weigh a small salary against larger dividends. Because dividends now carry higher rates and the company has already paid Corporation Tax on its profits, the sums are tighter than they used to be. Our dividend vs salary calculator and limited company tax calculator let you compare the combined cost.

For context on the wider tax landscape, MoneyHelper's guide to tax on savings and investments sets out how dividends, interest and capital gains are treated together.

Common mistakes to avoid

• Forgetting dividends stack on top of other income. A £5,000 dividend taxed at 10.75% for a basic rate taxpayer can be taxed at 35.75% for someone already near the higher rate threshold. The rate is about your total income, not the dividend size.
• Assuming the allowance is tax-free band space. The £500 allowance is taxed at 0% but still uses up part of your basic rate band, as Example 1 shows.
• Missing the reporting duty. If your dividends are above £10,000 you must report them through Self Assessment. Between £500 and £10,000 you can ask HMRC to change your tax code or register for Self Assessment. Our Self Assessment tax calculator helps you check the total bill.
• Confusing Corporation Tax with dividend tax. A company pays Corporation Tax on its profits first; you then pay dividend tax personally on what is paid out. They are two separate charges.
• Keeping no paper trail. Each dividend should be backed by a board minute and a voucher. You can produce one with our dividend voucher generator.

These figures are estimates for guidance only and not personal tax or financial advice. Your own position can depend on other income, reliefs and your nation of residence, so check with HMRC or an adviser before acting.

Who should use this calculator

For company directors and shareholders working out the tax on dividends. Dividends are taxed differently from salary and sit as the top slice of your income — so the rate depends on what else you earn, and the same dividend costs different amounts to different people.

Two things drive the answer. The dividend allowance is now just £500, down sharply from £5,000 when it was introduced, so far more small shareholders now pay something. And dividends carry no National Insurance, which is the core reason the salary-plus-dividends structure is common for directors.

What this calculator assumes

• The £500 dividend allowance is applied first; dividends within it are tax-free but still count towards your total income.
• Rates are 10.75% at basic, 35.75% at higher and 39.35% at additional rate.
• Dividends are stacked on top of other income, so salary determines which bands they fall into.
• No National Insurance is due on dividends.

Limitations — what it does not cover

• Whether the company can legally pay the dividend. Dividends must come from distributable profits after Corporation Tax; paying from insufficient reserves makes them unlawful and repayable.
• Corporation Tax already paid by the company on the profit — see the corporation tax calculator.
• Dividends inside an ISA or pension, which are tax-free.
• Timing. A dividend is taxed when declared and made available, which allows planning across tax years.
• Scottish taxpayers — dividend rates are UK-wide even though earned income is not.
• Payments on account, which a large dividend can trigger for the following year.

Related calculators

Carry on planning with the dividend vs salary calculator, the corporation tax calculator for the company side, and the income tax calculator to see your whole-income picture for 2026/27.