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What are the dividend tax rates in the UK?
Dividend tax rates have been rising and the tax-free allowance has been shrinking. If you earn dividends alongside a salary, here is what you owe for 2025/26 and how to make sure you are not paying more than you need to.
| Dividend tax rates rose by 2 percentage points in April 2026, and the tax-free allowance has fallen from £2,000 to £500 since 2023/24. Together, these two changes mean that someone receiving £3,000 in dividends today pays roughly four times more dividend tax than they would have in 2022/23, even if their income has not changed at all.
If you have a salary and dividend income, or you pay yourself through your limited company, 2025/26 is the last year the current rates apply. It is worth knowing exactly where you stand before you file. Rates and allowances verified for the 2025/26 tax year. Last updated October 2026.
Not sure what you owe on your salary and dividends combined? Our calculator works it out for you in minutes. |
Do you pay tax on dividends?
Yes. You pay tax on any dividend income above £500 at rates of 8.75%, 33.75% or 39.35%, depending on your total income.
You do not pay tax on dividends if:
- they fall within your £500 dividend allowance
- they come from shares held inside a stocks and shares ISA
If your dividend income outside an ISA is over £10,000, you need to file a Self Assessment tax return. Even below that threshold, it can be worth filing voluntarily to claim pension relief, reclaim overpaid tax, or get ahead of a more complex year.
How to calculate tax on dividends
Working out your dividend tax bill comes down to three steps:
- Add your dividend income to all your other income (salary, rental income, savings interest, etc.)
- Work out your income tax band based on that total
- Apply the dividend tax rate for your band to any dividends above the £500 allowance
Dividends are always taxed last. Your salary and other earnings fill up your personal allowance and rate bands first.
Example: salary and dividends
Sarah earns a £45,000 salary and receives £8,000 in dividends, giving a total income of £53,000.
- £500 covered by the dividend allowance: no tax
- £5,270 in the basic rate band at 8.75% = £461
- £2,230 in the higher rate band at 33.75% = £753
- Total dividend tax: £1,214
As Sarah’s example shows, a salary well below the higher rate threshold can still push dividends into the 33.75% band. If you are a company director paying yourself via salary and dividends, this same calculation applies to you.
What’s your income tax band?
Your income tax band is based on your total income from all sources: salary, dividends, rental income, savings interest and so on. Dividends sit on top of your other income, so they can push you into a higher band than you might expect.
The income tax rates in the 2025/26 tax year 👇
| Income | Tax rate | Tax band |
| Up to £12,570 | 0% | Personal allowance |
| £12,571 to £50,270 | 20% | Basic rate |
| £50,271 to £125,140 | 40% | Higher rate |
| over £125,141 | 45% | Additional rate |
Scottish taxpayers: different rates apply.
The dividend tax rates for 2025/26
Once you know your income tax band, apply the corresponding dividend tax rate to any dividend income above the £500 allowance.
Dividend tax rates in the 2025/26 tax year. The dividend allowance is currently £500 👇
| Income | Tax band | Tax rate |
| Up to £12,570 | Personal allowance | 0% |
| £12,571 – £50,270 | Basic rate | 8.75% |
| £50,271 – £125,140 | Higher rate | 33.75% |
| £125,140+ | Additional rate | 39.35% |
Rates increased by 2 percentage points in April 2026. If you are filing for 2025/26, the rates above apply. From 2026/27, the basic rate rises to 10.75% and the higher rate to 35.75%.
Not sure if your dividends are taxed correctly?
Not sure whether you are paying the right amount on your dividend income, or whether you could be more tax-efficient? Get a professional, accredited accountant to review your situation and make sure you are not leaving money on the table.
Mixed income: Salary and dividends
If you earn a salary and receive dividends, the two interact in a way that is easy to underestimate.
Your salary uses up your personal allowance and basic rate band first. Dividends are taxed on top of that, so even a modest salary can push dividend income into the higher rate band.
This applies to two common situations:
- Company directors paying themselves a small salary and taking the rest as dividends. This is a tax-efficient approach, but the interaction between salary and dividends means your tax bill can be higher than expected if you do not plan ahead.
- Employees with shares, including RSUs and employee share schemes, who receive dividends on top of their salary. Even a relatively small dividend payment can tip you into a higher band once your salary is factored in.
Not sure where your dividends land? Use our dividend tax calculator to see your exact position based on your salary and dividend income combined. If you receive dividends through an employee share scheme, a Taxfix accountant can help you work out exactly what you owe.
How about tax on dividends from investments?
It depends on where you hold your shares:
- Stocks and shares ISA: no tax on dividends, ever.
- Any other account (GIA, trading account, etc.): dividends are taxable above the £500 allowance, even if you automatically reinvest them into new shares.
HMRC treats dividends as income in the year you receive them, not the year you reinvest them. Your broker or platform should provide a dividend statement showing your total for the tax year.
If you have dividend income from multiple sources, such as employee share schemes and personal investments, you must add them all together when calculating your tax.
To figure out exactly how much tax you’ll pay, you can use our dividend tax calculator.
Your situation
Tax and profit
Your dividend profits
£3,000
Dividend tax to pay
£219
£500 tax-free dividend allowance
?
Profit after tax
£2,781
You can either call HMRC on 0300 200 3300 to take this tax from your salary or pension, or include it on your Self Assessment tax return.
How your dividend tax is calculated
Tax on dividends is calculated pretty much the same way as tax on any other income.
The biggest difference is the tax rates – instead of the usual 20%, 40%, 45% (depending on your tax band), you’ll be taxed at 8.75%, 33.75%, and 39.35%.
The numbers look strange but the reason is simple: the company paying you those dividends already paid corporate tax, so you’re paying the difference.
This is mostly relevant if you own your company and you’re trying to decide the best way to pay yourself: dividends or salary. Keep in mind that if you pay from your salary, you also need to pay National Insurance.
In your case you earned £3,000 in dividends and £29,000 in other income (this can be salary, rent, etc.).
Dividend Tax
You don’t pay any dividend tax on the first £500 you make in dividends.
You pay 8.75% on the next £2,500
Call HMRC on 0300 200 3300 so they can change your tax code – you’ll pay the dividend tax through your salary or pension.
If you normally file a tax return, you can also pay dividend tax through it.
When do you need to report dividend income?
You must report dividend income to HMRC if it exceeds your £500 allowance. How you do that depends on how much you receive:
- £500 or less: no action needed. You are within the dividend allowance.
- £501 to £10,000: you do not need to file a Self Assessment tax return. Contact HMRC after the end of the tax year and they will collect the tax through your PAYE code.
- Over £10,000: you must file a Self Assessment tax return. Register with HMRC after the end of the tax year.
You may also need to file if you have other untaxed income, such as capital gains, rental income, or savings interest above the allowances. Most people in this situation are already filing Self Assessment for another reason, so dividends are simply added to the return.
Not sure whether you need to file? Find out if Self Assessment applies to you.
How to pay tax on dividends
There are two ways to pay:
- Self Assessment: include your dividend income on your tax return. This is the most common route if you have multiple income sources. Dividend tax is due by 31 January following the end of the tax year.
- PAYE adjustment: if you are employed and your dividend tax bill is under £3,000, HMRC can collect it through your tax code, spread across your monthly pay. Contact HMRC after the end of the tax year to arrange this.
One important point: your broker or platform does not deduct dividend tax automatically. It is your responsibility to report it and pay it.
Need to declare your dividend profits or losses?
Get an accredited accountant to sort and file your Self Assessment tax return to declare your dividend tax liabilities to HMRC. Use Taxfix for a stress-free process and a low, one-off price.
Dividend tax and company directors
If you are a director of your own limited company, you likely pay yourself a small salary and take the rest as dividends. This is a popular approach because dividends are not subject to National Insurance contributions, unlike salary, making it a more tax-efficient way to extract profit from your company.
However, you must report and pay dividend tax on any dividends above the £500 allowance. And with the allowance having fallen from £5,000 in 2016 to just £500 today, more directors are paying more dividend tax than they might expect.
A Taxfix accountant can help you work out the most tax-efficient salary and dividend split for your situation. Read our guide on paying yourself a limited company director salary.
FAQ: Dividend tax rates in the UK
Do you pay tax on dividends?
Yes. You pay tax on dividends in the UK above £500 at rates of 8.75%, 33.75% or 39.35%, depending on your total income. Dividends inside a stocks and shares ISA are always tax-free.
How much tax do you pay on dividends?
It depends on your income tax band. Basic rate taxpayers pay 8.75%, higher rate taxpayers pay 33.75%, and additional rate taxpayers pay 39.35% on dividends above the £500 allowance.
What is the dividend allowance for 2025/26?
The dividend allowance is £500 for the 2025/26 tax year. The first £500 is tax-free, regardless of your income tax band.
Do I pay tax on dividends if I reinvest them?
Yes. HMRC treats tax on dividend income as arising in the year you receive it, not the year you reinvest it. Your broker or platform should provide a statement showing your total for the tax year.
Are dividends from ISAs taxable?
No. There is no tax on dividends received from shares held inside a stocks and shares ISA. They are completely tax-free and do not need to be reported to HMRC.
How do I report dividend income to HMRC?
If your dividends are between £501 and £10,000, contact HMRC after the end of the tax year to have the tax on dividend income collected through your PAYE code. If it is over £10,000, you must register for Self Assessment and file a tax return.
Do company directors pay tax on dividends?
Yes. Company directors pay tax on dividend income above the £500 allowance, at the rate that corresponds to their total income. Dividends do not attract National Insurance, which is why the salary-plus-dividends approach is popular, but the tax still applies.
What happens if I don’t report dividend income?
HMRC can charge interest and issue penalties for late or missing returns. If you are unsure whether you need to report, a Taxfix accountant can help you work out your position quickly.
This article provides general information only and is not personalised tax advice.
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