Dividends Tax UK: Dividend Tax Rates and Tax-Free Allowance

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If you receive dividends from shares or take dividends from your own limited company, you may have to pay Income Tax on that dividend income. The rules are slightly different from ordinary employment or self-employed income, and from 6 April 2026 the dividend tax rates have increased for basic-rate and higher-rate taxpayers.

For the 2026/27 tax year, the dividend tax rates are 10.75% for basic-rate taxpayers, 35.75% for higher-rate taxpayers and 39.35% for additional-rate taxpayers. There is also a £500 Dividend Allowance, meaning you do not pay dividend tax on the first £500 of dividends, although the dividends still count towards your total income when working out which tax band applies.

What is dividends tax UK?

Dividend tax is Income Tax that you may have to pay when you receive dividends from shares you own or from a company in which you are a shareholder.

A dividend is normally a payment made by a company to its shareholders from profits available for distribution. For example, if you own shares in a limited company and the company pays you £20,000 in dividends during the tax year, those dividends are part of your taxable income and may create an Income Tax liability.

This is particularly important for directors and shareholders of small limited companies, because dividends are often used alongside a salary as a way of taking money out of the company.

Dividend income is taxed differently from salary, but it still forms part of your overall income when determining which tax band applies. This means that having a salary or other income can affect the rate at which your dividends are taxed.

Dividends tax rate UK – 2026/27

For the 2026/27 tax year, which runs from 6 April 2026 to 5 April 2027, the dividend tax rates are:

Tax band	Dividend tax rate
Basic rate	10.75%
Higher rate	35.75%
Additional rate	39.35%

These rates apply to dividend income above the £500 Dividend Allowance. The basic and higher dividend rates increased by two percentage points from 6 April 2026, while the additional rate remained at 39.35%.

If you are looking at older information online, you may still see the previous rates of 8.75% and 33.75%. Those rates applied for 2025/26, so it is important to check which tax year you are dealing with.

If you want a more detailed breakdown of the current rates, you can also read our guide to Dividend Tax Rates 2026/27.

What is the dividends tax free allowance for 2026/27?

The Dividend Allowance for the 2026/27 tax year is £500.

This means that you can receive up to £500 of dividend income without paying dividend tax on it. The allowance is available regardless of whether you are a basic-rate, higher-rate or additional-rate taxpayer.

However, the £500 allowance does not mean that the dividends are completely ignored for tax purposes. Your dividends still count as part of your total income when determining which Income Tax band you fall into.

For example, if you receive £5,000 of dividends and have already used your Personal Allowance and basic-rate tax band with other income, the dividends may be taxed at the higher dividend rate rather than the basic dividend rate.

The Dividend Allowance has also been reduced significantly over recent years, from £2,000 in 2022/23 to £1,000 in 2023/24 and then £500 from 2024/25 onwards. It remains at £500 for 2026/27.

Do I pay tax on dividends if I have no other income?

You may not have to pay any tax on your dividends if you have no other taxable income and your total income is within your Personal Allowance.

For 2026/27, the standard Personal Allowance is £12,570, so your available Personal Allowance can cover dividend income before the Dividend Allowance is considered.

For example, if your only income during the tax year is £10,000 of dividends, you would normally have no Income Tax to pay because your total income is below the £12,570 Personal Allowance.

This is why it is important not to look at the £500 Dividend Allowance on its own, because your Personal Allowance can also affect how much of your dividend income is taxable.

You can read more about how the Personal Allowance works in our guide to Personal Allowance and Tax-Free Income.

How much dividend tax will I pay on £10,000 of dividends?

The amount of tax you pay on £10,000 of dividends depends on your other income and your available tax allowances.

For example, if the £10,000 of dividends is your only income for 2026/27, your total income is below the £12,570 Personal Allowance, so you would normally pay no Income Tax on those dividends.

If, however, you already have enough salary or other taxable income to use your Personal Allowance and basic-rate band, the calculation will be different.

Assuming all £10,000 of dividends falls within the basic-rate dividend band, the first £500 is covered by the Dividend Allowance and the remaining £9,500 is taxed at 10.75%.

That would give dividend tax of £1,021.25.

The actual calculation can be different where you have other income, because dividends are effectively taxed after your other taxable income when determining which band they fall into.

How much dividend tax will I pay as a higher-rate taxpayer?

If your dividends fall within the higher-rate band, the dividend tax rate for 2026/27 is 35.75%.

For example, if you receive £10,000 of dividends and the entire amount is above your £500 Dividend Allowance and falls within the higher-rate band, £9,500 would be taxable at 35.75%.

The calculation would therefore be:

£10,000 dividends − £500 allowance = £9,500 taxable dividends

£9,500 × 35.75% = £3,396.25 dividend tax

Again, this is a simplified example. Your actual tax liability depends on your complete income position for the tax year.

How are dividends from my own limited company taxed?

If you are a director and shareholder of your own limited company, dividends can be an important part of how you take money from the company, but the company and you are treated separately for tax purposes.

The company does not normally deduct dividends as an expense when calculating its Corporation Tax liability. Instead, dividends are generally paid from profits available for distribution after taking account of the company’s tax position.

You then consider the dividends as part of your personal income when working out your own Income Tax liability.

For example, a company director may receive a salary through PAYE and then receive additional income as dividends. The salary and dividends are not simply taxed separately without reference to each other, because your salary and other income affect the tax band into which your dividends fall.

This is one reason why deciding how much salary and dividends to take from a limited company should be considered as part of the company’s overall tax position rather than simply choosing the payment that appears to have the lowest tax rate.

Are dividends from an ISA tax-free?

Yes. Dividends received from investments held within an ISA are not subject to dividend tax.

This means that if you hold shares inside a Stocks and Shares ISA and those investments pay dividends, you do not normally pay Income Tax on those dividends. HMRC specifically confirms that dividends from shares held in an ISA are not taxable.

The same principle is one of the reasons why tax-efficient investment wrappers can be useful for people who receive investment income.

Do I need to report dividend income to HMRC?

Whether you need to report your dividends to HMRC depends on the amount of dividend income you receive and your overall tax position.

If your dividends are taxable and your tax cannot be collected through PAYE, you may need to complete a Self Assessment tax return.

For example, a company director who receives dividends from their own company may need to include those dividends on their Self Assessment tax return, particularly where the dividends result in additional tax becoming payable.

If you are unsure whether you need to file a return, our guide on doing a Self Assessment tax return yourself explains the basic process and the circumstances in which you may need to report income to HMRC.

When do I pay dividend tax?

If you complete a Self Assessment tax return, any dividend tax you owe is normally included in your overall Self Assessment tax liability.

The tax year runs from 6 April to 5 April of the following year. For example, dividend income received between 6 April 2026 and 5 April 2027 belongs to the 2026/27 tax year.

The normal online Self Assessment filing deadline for the 2026/27 tax year will be 31 January 2028, and any tax due for that tax year will normally also need to be paid by that date.

However, some taxpayers may also have payments on account, depending on their circumstances and the amount of tax they owe.

Are dividend tax rates the same across the UK?

The dividend tax rates apply across the UK, including England, Wales, Scotland and Northern Ireland.

However, Scotland has different Income Tax rates and bands for most non-savings and non-dividend income. Dividend income continues to use the UK dividend tax rates, so Scottish taxpayers can have a different overall tax position depending on how much salary, self-employed income, savings income and dividend income they receive.

Is dividend income still tax-efficient in the UK?

Dividends can still be tax-efficient in some circumstances, particularly when they are paid by a limited company to a shareholder, but the tax advantage should not be judged by looking at the dividend tax rate alone.

A company must first make profits, and the company may have to pay Corporation Tax before those profits can be distributed as dividends. The shareholder then considers any personal dividend tax that becomes payable.

For company directors, the most suitable combination of salary and dividends depends on the company’s profits, the director’s other income, National Insurance, Corporation Tax and the director’s personal circumstances.

The increase in dividend tax rates from April 2026 means that it is now even more important for company directors and investors to understand how their dividend income fits into their overall tax position.

What are the key dividend tax rules for 2026/27?

The main points to remember are simple: the Dividend Allowance is £500, the dividend tax rate is 10.75% for basic-rate taxpayers, 35.75% for higher-rate taxpayers and 39.35% for additional-rate taxpayers, and dividends can also use your Personal Allowance if you have not already used it against other income.

If you receive dividends from your own limited company, it is particularly important to keep proper records of the dividends you receive and make sure they are supported by the company’s available profits and appropriate dividend paperwork.

Dividend taxation can become complicated when you have a combination of salary, self-employment income, rental income, savings, investments or dividends from several companies, so if you are unsure how much tax you should pay, it is worth checking your position before submitting your Self Assessment tax return.

This article is intended as general information for UK taxpayers and is based on the tax rules for the 2026/27 tax year. Your actual tax liability will depend on your individual circumstances.

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