Dividend Tax UK 2026-27: Rates, Allowance and a Worked Example

In 2026-27 the first £500 of dividends you receive is tax-free. Dividends above that are taxed at 10.75% in the basic-rate band, 35.75% in the higher-rate band and 39.35% in the additional-rate band. The first two rates each rose by 2 points on 6 April 2026, from 8.75% and 33.75%, under Finance Act 2026, while the additional rate and the allowance stayed as they were.

What are the dividend tax rates and allowance?

• Dividend allowance: the first £500 is taxed at 0%.
• Basic-rate band: 10.75%.
• Higher-rate band: 35.75%.
• Additional-rate band: 39.35%.

The allowance has shrunk from £5,000 when it began in April 2016 to £2,000 from April 2018, £1,000 in 2023-24 and £500 from April 2024. Dividends on shares held in an ISA or a pension are tax-free and do not use it, and nor do dividends covered by any unused personal allowance. Scottish taxpayers pay the same dividend rates as the rest of the UK.

How do dividends sit on top of your other income?

Dividends are treated as the top slice of your income. Earnings, pensions and rent are taxed first, then savings interest, then dividends, so their rate depends on how much of the £37,700 basic-rate band is left by the time they arrive. A modest dividend on top of a salary close to £50,270 can be taxed mostly at 35.75%.

The allowance is a 0% band, not a deduction. The first £500 is taxed at nothing but still uses up £500 of your band, which can push other dividends into a higher rate. Dividends also count towards the £100,000 income level at which the personal allowance starts to shrink.

How much tax does a director pay on salary and dividends?

Take a company director who pays themselves a £12,570 salary and takes £50,000 in dividends in 2026-27:

• The salary is covered by the £12,570 personal allowance, and employee National Insurance also starts at £12,570, so neither is due on it.
• The £37,700 basic-rate band takes the first £37,700 of dividends: £500 at 0% and £37,200 at 10.75%, which is £3,999.
• The other £12,300 sits above the £50,270 higher-rate threshold and is taxed at 35.75%, which is £4,397.25.
• The total is £8,396.25. At 2025-26 rates it would have been £3,255 plus £4,151.25, or £7,406.25, so the April 2026 rise costs £990, which is 2 points on £49,500.

Because the £500 taxed at 0% still sits inside the basic-rate band, £12,300 lands in the higher rate rather than £11,800. For scale, £62,570 of income in all is well above typical UK salaries.

The company's side matters too. Dividends come out of profits after corporation tax, which is 19% on profits up to £50,000 and 25% above £250,000, with marginal relief between, and can only be paid from profits available for distribution. Salary is deductible for corporation tax but carries employer National Insurance at 15% above £5,000 a year, which on a £12,570 salary is £1,135.50, unless the company can claim the Employment Allowance. It cannot where the director is the only employee paid above £5,000. Dividends carry no National Insurance at all.

How do you report dividend tax?

If your dividends above the allowance come to £10,000 or less, you can tell HMRC through its helpline, ask it to collect the tax through your tax code, or put them on your Self Assessment return if you already file one. Above £10,000 you need to file a return, registering by 5 October after the end of the tax year if you do not already. Tax due through a return is paid by 31 January after the tax year ends, and when that bill is £1,000 or more HMRC usually also asks for two payments on account towards the next year, on 31 January and 31 July, unless more than 80% of your tax was already collected at source. CoreFi's Budget page works out what the April 2026 rise costs on your own dividends.

How to split what you take between salary and dividends depends on your circumstances, and a qualified adviser can advise.