Dividend Tax Calculator UK 2025–26

How dividend tax works in the UK

Dividends are payments made by a company to its shareholders from after-tax profits. For most people this means dividends received from shares held in a stocks and shares ISA (which are tax-free), a general investment account, or dividends taken from a personal limited company.

The dividend allowance

Every UK taxpayer receives a dividend allowance each tax year — the amount of dividend income that is not subject to dividend tax. In 2025–26, this is £500. This sits on top of the personal allowance; if your dividends are fully covered by your personal allowance, you do not need to use the dividend allowance at all. The allowance has been progressively reduced from £5,000 (2017-18) to its current £500 level.

The three dividend tax rates

Dividends above the allowance are taxed at one of three rates depending on the income tax band they fall into:

• Basic rate (8.75%): Dividends that fall within the basic rate band — total income up to £50,270.
• Higher rate (33.75%): Dividends that push total income above £50,270 and up to £125,140.
• Additional rate (39.35%): Dividends that push total income above £125,140.

These rates are UK-wide. Unlike income tax, where Scotland sets its own rates for non-savings income, dividend tax rates are identical across England, Wales, Scotland, and Northern Ireland.

How dividends stack on top of other income

Dividends are always treated as the top slice of your income. This means your personal allowance (£12,570 in 2025–26) and the basic rate band are first used up by other income sources — salary, self-employment profit, rental income, pension income. Only after those are accounted for are dividends slotted in on top.

For example, if you earn a £40,000 salary, you have used £27,430 of the basic rate band (£40,000 minus the £12,570 personal allowance). You have £9,730 of basic rate band remaining before reaching £50,270. Dividends up to £500 are covered by the allowance, and the next £9,730 of dividends would be taxed at 8.75%. Any further dividends beyond that would be taxed at the higher rate of 33.75%.

No National Insurance on dividends

Dividends are not subject to National Insurance contributions of any class. This makes dividend income materially more tax-efficient than employment income for higher earners. A director-shareholder paying themselves a salary up to the National Insurance primary threshold (£12,570) and topping up with dividends can reduce their combined income tax and NI burden significantly compared to a pure employment income structure.

Reporting dividend income

If your total dividend income exceeds £1,000 per year, you must report it to HMRC via Self Assessment. If you already file a Self Assessment tax return for other reasons (such as self-employment income), you should include all dividend income regardless of the amount. Dividends within an ISA do not need to be reported.