How dividends are taxed in 2026/27
Dividends are taxed after the rest of your income. HMRC first applies your Personal Allowance, £12,570 in 2026/27, to your salary, pension or rental income, and only then to your dividends. The first £500 of taxable dividends is covered by the dividend allowance at 0%. Everything above is taxed according to the income tax band it falls into:
| Band | Taxable income | Dividend rate | 2025/26 rate |
|---|---|---|---|
| Basic rate | Up to £37,700 above the Personal Allowance (£50,270 of income) | 10.75% | 8.75% |
| Higher rate | Up to £125,140 | 35.75% | 33.75% |
| Additional rate | Over £125,140 | 39.35% | 39.35% |
The Personal Allowance shrinks by £1 for every £2 of income above £100,000, and disappears completely at £125,140. Dividends count towards that income, so a large dividend can also reduce your allowance.
Worked examples
A basic rate taxpayer. With a £30,000 salary and £5,000 of dividends, the salary uses the whole Personal Allowance. The first £500 of dividends is tax-free and the remaining £4,500 is taxed at 10.75%: £483.75, an effective rate of 9.68%. Last year, at 8.75%, the same dividends cost £393.75.
A higher rate taxpayer. With £50,000 of salary and £10,000 of dividends, only £270 of the basic rate band is left; the allowance uses it up and the rest of the dividends fall in the higher rate band: £3,396.25 of tax (33.96%).
Dividends only. A retiree or investor with no other income and £20,000 of dividends pays £744.98: £12,570 is covered by the Personal Allowance and £500 by the dividend allowance.
A company director. The classic mix of a £12,570 salary and £37,700 of dividends fills the basic rate band exactly: the dividend tax comes to £3,999.00 in 2026/27.
How to reduce the tax on your dividends
- Use your ISA allowance. Up to £20,000 a year can go into a Stocks and Shares ISA, where dividends and gains are tax-free for life.
- Use your pension. Investments held in a SIPP or workplace pension grow free of dividend tax, and contributions get tax relief.
- Share with your spouse or civil partner. Transfers between spouses are free of Capital Gains Tax; holding shares in the name of the partner with the lower income can use two dividend allowances and a lower band.
- Watch the £100,000 threshold. Between £100,000 and £125,140 of income, the loss of Personal Allowance creates an effective marginal rate far above the headline rate. Pension contributions can bring income back under the threshold.
What the calculator does not include
The calculator treats all your other income as non-savings income. Savings interest has its own rules (the starting rate for savings and the Personal Savings Allowance), and Gift Aid or pension contributions can extend your basic rate band. It does not include National Insurance, the High Income Child Benefit Charge or the Marriage Allowance. For a Self Assessment return, rely on HMRC's own calculation.
Selling shares as well? Use the UK Capital Gains Tax calculator. To see how reinvested dividends grow, try the compound interest calculator.
Frequently asked questions
What are the dividend tax rates for 2026/27?
From 6 April 2026, dividends above your allowances 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 basic and higher rates rose by 2 percentage points from 8.75% and 33.75% in 2025/26; the additional rate is unchanged.
How much dividend income is tax-free?
Everyone gets a £500 dividend allowance in 2026/27. On top of that, any part of your Personal Allowance (£12,570) not used by your salary, pension or other income also covers dividends. Someone with no other income can therefore receive £13,070 of dividends tax-free. Dividends from shares held in an ISA are always tax-free and do not count.
Does the £500 dividend allowance reduce my taxable income?
No. It is a 0% rate band, not a deduction. The £500 still counts towards your income bands, so it can push the rest of your dividends from the basic rate band into the higher rate band. The calculator applies this rule.
Do I need to tell HMRC about my dividends?
If your dividends are within the £500 allowance, you do not need to report them. Between £500 and £10,000, you can ask HMRC to collect the tax through your tax code or report it on a Self Assessment return. Above £10,000 of dividends, you must complete a Self Assessment tax return. The deadline for paying 2026/27 tax through Self Assessment is 31 January 2028.
I live in Scotland: do the same dividend rates apply?
Yes. Dividend income is taxed at the UK-wide dividend rates and bands even for Scottish taxpayers. Your salary is taxed with Scottish bands, which can change how much of the basic rate band is left for dividends, so treat the result as a close estimate if you live in Scotland.
I am a company director paying myself in dividends: is this calculator right for me?
Yes for your personal dividend tax: enter your salary as other income and your dividends separately. It does not include corporation tax paid by your company on its profits (19% to 25%), National Insurance on your salary or student loan repayments.
Sources
- GOV.UK, Tax on dividends
- GOV.UK, Capital Gains Tax: what you pay it on, rates and allowances
- GOV.UK, Income Tax rates and Personal Allowances
Rates and thresholds checked on 11 October 2026.
Educational tool: not financial, tax or investment advice. Results are estimates based on the assumptions you enter and on official rates at the date shown. Investments can fall as well as rise. For decisions about your own situation, speak to a qualified adviser or tax professional. Read the full disclaimer.