Dividend Tax Rates 2026/27

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From 6 April 2026, the amount of tax you pay on dividend income will increase for most people. The new rates will be 10.75% for basic rate taxpayers and 35.75% for higher rate taxpayers. The additional rate will stay the same at 39.35%.

These changes mean that investors and company directors who pay themselves via dividends will likely see a higher tax bill in the 2026/27 tax year.

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What are these changes?

The UK government has confirmed that the tax rates applied to dividend income are rising by 2 percentage points for the Basic and Higher bands.

Here is the simple breakdown of the rates that will apply from April 2026 compared to the previous year:

Your Income Band	Old Rate (2025/26)	New Rate (2026/27)
Basic Rate	8.75%	10.75%
Higher Rate	33.75%	35.75%
Additional Rate	39.35%	39.35%

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Who does this affect?

These rates apply to anyone in the UK who receives income from dividends. This typically includes:

• Investors: People who own shares in companies (outside of an ISA or Pension) and receive a share of the profits.
• Business Owners: Directors of limited companies who pay themselves a salary and “top up” their income with dividends.

Is there any tax-free amount?

Yes. The Dividend Allowance allows you to earn a certain amount of dividend income before you pay any tax at all.

For the 2026/27 tax year, the allowance remains at £500.

• If you earn less than £500 in dividends: You pay £0 tax on them.
• If you earn more than £500: You only pay tax on the amount above £500.

How to protect your money

Because these rates apply to money held outside of tax wrappers, using tax-efficient accounts is more important than ever.

1. Stocks & Shares ISA: Any dividends you receive within an ISA are completely free of tax. They do not count towards your £500 allowance.
2. Pensions: Dividends received within a pension fund are also tax-free.

Summary for UK Taxpayers

If you rely on dividends for your income, you should prepare for a slightly higher tax bill from April 2026. While the Additional Rate remains frozen, the 2% hike on the Ordinary and Upper rates will impact most investors and small business owners.

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