Dividend Tax Calculator UK 2026–27
Enter your salary and dividend income to calculate how much dividend tax you owe in 2026–27. See your tax broken down by band — 8.75% basic, 33.75% higher, 39.35% additional — after the £500 tax-free dividend allowance. Dividends sit on top of your other income, so your salary determines which rate band your dividends fall into.
Rates correct for 2026–27 · Reviewed by the Richard Ross · Last updated April 2026
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.
What counts as a dividend
Dividends from shares held in a general investment account (GIA) are taxable and must be included when calculating your dividend tax. Dividends from shares held in a Stocks and Shares ISA are completely tax-free and do not count towards your dividend income. Distributions from investment funds — including OEICs, unit trusts, and investment trusts — are treated the same as share dividends for tax purposes. If you receive fund distributions outside an ISA, include them in your total dividend income.
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 2026–27, 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 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.
Dividend tax vs income tax
| Band | Dividend rate | Income tax rate | Saving |
|---|---|---|---|
| Basic rate | 8.75% | 20% | 11.25pp |
| Higher rate | 33.75% | 40% | 6.25pp |
| Additional rate | 39.35% | 45% | 5.65pp |
Dividend income is taxed at lower rates than employment income at every band — and dividends are also exempt from National Insurance. This rate differential is the core reason director-shareholders structure their income as a mix of salary and dividends rather than taking a pure salary.
Worked example: £40,000 salary with £15,000 dividends
Dividend tax calculation (2026–27):
- Salary: £40,000 (uses £27,430 of basic rate band after PA)
- Basic rate band remaining: £50,270 – £40,000 = £10,270
- Dividend allowance: first £500 tax-free
- Taxable dividends: £15,000 – £500 = £14,500
- At 8.75% (within basic rate band): £10,270 × 8.75% = £898.63
- At 33.75% (above basic rate band): £4,230 × 33.75% = £1,427.63
Total dividend tax: £2,326.25
Effective rate on dividends: 15.5%
Compare this to taking the same £15,000 as salary: you would pay £6,000 in income tax (40%) plus NI — significantly more than the £2,326 in dividend tax. Use the take-home pay calculator for the full comparison.
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 2026–27) 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. Use our income tax calculator to check how much of your basic rate band your salary has used.
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 NI 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 — this is why many contractor director-shareholders structure income as salary plus dividends. See our IR35 calculator if you are uncertain about your employment status. For comparison, a cash bonus from employment attracts both income tax and NI, making dividends a more efficient income mechanism for those with the flexibility to choose.
Reporting dividend income
If your total dividend income exceeds £10,000 per year, you must register for and file a Self Assessment tax return to declare your dividends. If your dividend income is above the £500 allowance but below £10,000, HMRC can collect the tax owed by adjusting your PAYE tax code — Self Assessment is not required unless you are already registered for other reasons. If you already file a Self Assessment return (for example, for self-employment income or a student loan collected via Self Assessment), you should include all dividend income regardless of amount. Dividends within an ISA do not need to be reported.
Sources: HMRC — Tax on dividends (gov.uk), HMRC — Income Tax rates and allowances (gov.uk)
Frequently asked questions
What is the dividend allowance in 2026–27?
The dividend allowance for 2026–27 is £500. You can receive up to £500 in dividends tax-free each year, regardless of your income tax band. This applies on top of any remaining personal allowance. The allowance was cut from £2,000 in 2022–23 to £1,000 in 2023–24 and then to £500 from 2024–25, where it remains.
What dividend tax rates apply in 2026–27?
There are three dividend tax rates in 2026–27, unchanged from 2025–26. Basic rate taxpayers pay 8.75% on taxable dividends. Higher rate taxpayers (income over £50,270) pay 33.75%. Additional rate taxpayers (income over £125,140) pay 39.35%. Dividends are always treated as the top slice of your income, sitting on top of salary, rental income, and other earnings.
Do Scottish income tax rates affect my dividend tax?
No. Dividend tax is set by the UK Parliament and uses UK-wide rates regardless of where you live in the UK. Scottish income tax rates (which differ from England, Wales, and Northern Ireland) apply only to non-savings, non-dividend income. Your dividends are always taxed at 8.75%, 33.75%, or 39.35% depending on which band they fall into.
Do I pay National Insurance on dividends?
No. National Insurance applies only to earned income — primarily employment income and self-employment profits. Dividends are investment income and are not subject to any National Insurance contributions. This is one of the reasons director-shareholders often take a mix of small salary and dividends.
How are dividends taxed when I have other income?
Dividends are always treated as the top slice of your total income. Your personal allowance and basic rate band are first used up by your other income (such as salary), and dividends are then stacked on top. So if your salary already takes you into the higher rate band, all your taxable dividends will be taxed at the higher dividend rate of 33.75%.
Do I need to file a Self Assessment tax return for dividend income?
Only if your total dividend income exceeds £10,000 per year. Below that threshold, HMRC can collect any tax owed by adjusting your PAYE tax code. If you are already registered for Self Assessment for other reasons (such as self-employment), you must declare all dividend income regardless of amount. Dividends within an ISA do not need to be reported.
What counts as dividend income for tax purposes?
Dividends from shares held in a general investment account (GIA) are taxable. Dividends from shares or funds held in a Stocks and Shares ISA are completely tax-free and do not need to be reported. Distributions from investment funds (such as OEICs and unit trusts) are treated the same as share dividends for tax purposes.
How much dividend tax do I pay on £10,000 of dividends?
It depends on your other income. If your salary is £30,000 (basic rate), the first £500 of dividends is covered by the allowance. The remaining £9,500 is taxed at the basic rate of 8.75% = £831.25 in dividend tax. If your salary is £55,000 (higher rate), all £9,500 of taxable dividends falls in the higher rate band: 33.75% = £3,206.25.
What is the most tax-efficient salary and dividend split for a director?
For 2026-27, many director-shareholders take a salary of £12,570 (the personal allowance) to preserve their NI record without paying income tax, then top up with dividends. The first £500 of dividends is tax-free, and dividends within the basic rate band are taxed at just 8.75% — far lower than the 20% income tax plus 8% NI on equivalent salary. The optimal split depends on your total income level.
Do dividends count as income for student loan repayments?
No. Dividends paid from a limited company do not count as income for student loan repayment purposes. Only employment income and self-employment profits trigger repayments. This is one reason the salary/dividend structure is popular with contractor directors — it can significantly reduce student loan deductions compared to a pure salary.
Related calculators
This calculator provides estimates only. Results are based on the 2026–27 tax year. Credibrate is not a tax adviser. For personalised advice speak to a qualified accountant.