Dividend tax calculator

What the dividend tax changes mean for you

The tax-free dividend allowance is now £500, and the basic and higher dividend tax rates rose from 6 April 2026. Together, these mean more of your dividend income is taxed than before, even if you receive the same amount.

• Allowance: the dividend allowance fell from £1,000 to £500 in April 2024. Dividends above £500 are taxed, after any unused Personal Allowance is used.
• Rates for 2026/27: the basic rate rose from 8.75% to 10.75%, and the higher rate rose from 33.75% to 35.75%. The additional rate stays at 39.35%.

Example: A higher-rate taxpayer with £3,000 in dividends. Assumes all the dividends fall within the higher-rate band.

• 2022/23: (£3,000 − £2,000) = £1,000 taxable × 33.75% = £337.50
• 2026/27: (£3,000 − £500) = £2,500 taxable × 35.75% = £893.75
• Difference: +£556.25. Most of this comes from the lower allowance (£536.25), and the rest from the higher rate (£20).

This is an illustration only. Your result depends on your other income and the tax band your dividends fall into.

More detail on the rates, the filing rules and your next steps is in the sections below.

What are dividends?

A dividend is a payment a limited company makes to its shareholders from its profits. If you buy shares in a company, you may receive dividends, but not every company pays them. Companies choose whether to share their profits, so it’s worth checking before you invest.

Dividends usually come in one of five forms:

• Cash dividends: the most common type, paid as money.
• Stock dividends: extra shares in the company, instead of cash.
• Dividend reinvestment plans: dividends used automatically to buy more shares in the same company.
• Special dividends: one-off payments, usually made outside the regular schedule.
• Preferred dividends: payments made to holders of preferred shares before ordinary shareholders are paid.

For investors, dividends can be a regular source of income, but they have their own allowance and tax rates, separate from your salary. For company directors, dividends are one way to take money out of the business, so it’s worth understanding how they are taxed before you decide how to pay yourself.

What is dividend income?

Dividend income is the money you earn from owning shares in a company that pays dividends. Unlike savings interest, which a bank pays at a set rate, dividends aren’t guaranteed. The company decides whether to pay them and how much, usually from its profits. Dividends are taxed under their own rules, with a separate allowance and tax rates. Dividends from shares held in an ISA are not taxed.

How dividend tax works in 2026/27

You don’t pay tax on dividends that fall within your unused Personal Allowance, or on the first £500 of dividends each tax year.

Your other income, such as your salary or pension, is worked out first and sets your band. Your dividends are then added on top and taxed at the rate of the band they fall into.

Worked example: higher-rate taxpayer

With a £60,000 salary and £3,000 in dividends, your salary already takes you into the higher-rate band. After the £500 allowance, £2,500 is taxable:

(£3,000 − £500) × 35.75% = £893.75

You don’t pay National Insurance on dividends. We cover this later in this article.

For the full rules, see Tax on dividends, GOV.UK. 

What are the tax benefits?

Dividends can be a tax-efficient way to invest. The dividend tax rates are lower than standard Income Tax rates. For 2026/27, the basic rate on dividends is 10.75%, compared with 20% on other income. The higher rate is 35.75%, compared with 40%, and the additional rate is 39.35%, compared with 45%.

You also don’t pay National Insurance on dividends. Dividends are usually paid out of profits that the company has already paid Corporation Tax on, so tax has already been paid at company level. 

Tax efficiency means using the allowances and rates available to you. Dividends from shares held in an ISA are not taxed, and the ISA allowance for 2026/27 is £20,000. If you invest beyond your £20,000 ISA allowance, any dividends earned in a general investment account are taxable, which is why understanding your dividend tax position matters.

Because the rates are lower, you keep more of your dividend income after tax.

What’s the dividend allowance?

As of April 2024, the dividend allowance is £500. This means you can receive up to £500 of dividends each tax year without paying tax on them. Any unused Personal Allowance can also cover dividends tax-free. Dividends above that amount are taxed at your dividend tax rate.

You only need to report dividends to HMRC if they go over both your unused Personal Allowance and the £500 allowance. If your dividend income is over £10,000, you need to file a Self Assessment tax return.

The allowance has fallen by three-quarters since 2022/23:

Do I need to file a Self Assessment?

You must file a Self Assessment tax return if any of these applied in the last tax year (6 April to 5 April):

• You were self-employed as a sole trader and earned more than £1,000.
• You had to pay Capital Gains Tax, which is tax on profits from selling assets such as shares. This generally applies when your gains go above the £3,000 annual exempt amount for 2026/27.
• You had to pay the High Income Child Benefit Charge and did not pay it through PAYE.
• Your dividend income was over £10,000.

Earning over £100,000 does not, on its own, mean you must file. You may also need to file if you have other untaxed income, such as savings interest, rental income or tips.

Dividends have their own rule. You only need to report dividends if they go over both your unused Personal Allowance (the tax-free income allowance, £12,570 for 2026/27) and the £500 dividend allowance.

The £500 allowance is separate from the filing rules. You can owe tax on dividends above £500 without filing a return if your dividend income is £10,000 or less, you’re in PAYE and you pay through your tax code. Filing is still the clearest way to declare your dividends and pay the tax in one place.

Deadlines: Online returns are due by 31 January after the tax year ends. For 2025/26, that’s 31 January 2027. Paper returns for 2025/26 are due by 31 October 2026.

There are two ways to pay what you owe:

1. File and pay directly. Submit your return and pay by 31 January.
2. Pay through your PAYE tax code. PAYE (pay as you earn) is the system that takes tax from your wages or pension. This option is available only if all three of these conditions apply:
   • you owe less than £3,000 (you can’t make a part payment to get under this amount)
   • you already pay tax through PAYE
   • you submitted your return on time, by 30 December 2026 (online) or 31 October 2026 (paper) for 2025/26

If you don’t need to send a return and your only income to declare is dividends, you may be able to ask HMRC to update your tax code instead.

Not sure whether you need to file? Taxfix helps you find out. With UK-qualified tax accountants and digital tools on your side, filing can be quick, compliant and stress-free.

Dividend tax rates by income band

Your dividend tax rate depends on which income tax band your total income falls into. Your other income, such as your salary or pension, is counted first and sets your band. Your dividends are then added on top, so each part of them is taxed at the rate of the band it falls into.

The 2025/26 rates apply to dividends received from 6 April 2025 to 5 April 2026.

If your total income is over £125,140, only the part of your dividends that falls above that level is taxed at 39.35%. You don’t pay this rate on all of your dividends.

If you need to pay this tax through Self Assessment, the deadline is 31 January after the end of the tax year. For dividends received in 2025/26, that’s 31 January 2027.