Written by Hammad Rasool MAAT·AAT licensed accountant·Updated November 2026

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Dividend tax rates for 2026/27

  • Dividend allowance: the first £500 of dividends is taxed at 0%.
  • Basic rate band: 10.75%
  • Higher rate band: 35.75%
  • Additional rate band: 39.35%

Dividends are treated as the top slice of your income. Your salary and other income use up your £12,570 Personal Allowance and the basic rate band first, and the dividends sit on top. That is why the same dividend can be taxed at different rates for 2 different people.

Example

A director takes a salary of £12,570 and dividends of £40,000. The salary uses the Personal Allowance. The first £500 of dividends is covered by the dividend allowance. The next £37,200 is taxed at 10.75%, which is £3,999. The last £2,300 falls in the higher rate band at 35.75%, which is £822. Total dividend tax: £4,821.

Key point: the dividend allowance does not give you an extra band. The £500 is taxed at 0% but still counts towards your basic rate band.

How the tax is paid

Dividend tax is not taken at source. If your dividends are more than the £500 allowance you need to tell HMRC, and above £10,000 of dividends that means a Self Assessment tax return. The tax for 2026/27 is due by 31 January 2028, usually with payments on account.

Ways directors reduce the bill

  • Get the salary level right: the best split between salary and dividends changes when rates change. See salary vs dividends.
  • Use a spouse's allowances: where a spouse genuinely owns shares, their allowance and basic rate band can be used.
  • Employer pension contributions: paid by the company, with no dividend tax.
  • Time dividends across tax years: to keep income out of the higher rate band.

Common questions

What is the dividend tax rate for 2026/27?
10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band, after a £500 dividend allowance.
How much dividend can I take tax free?
£500 under the dividend allowance. If you have unused Personal Allowance, dividends covered by that are also tax free.
Do I pay National Insurance on dividends?
No. Dividends are not subject to National Insurance.
Do I need a tax return for dividends?
If your dividends are over £10,000 you need to complete a Self Assessment tax return. Between £500 and £10,000 you still need to tell HMRC, and the tax can often be collected through your tax code.

Checked against GOV.UK on 10 November 2026: Tax on dividends, Income Tax rates.

About the author

Hammad Rasool MAAT is an AAT licensed accountant based in Bolton. TaxTune Accountants looks after sole traders, landlords, contractors and limited companies in Bolton, Wigan, Bury, Salford, Oldham, Stockport and Manchester, and online across the UK.