What is the UK Dividend Tax?
Dividend income is taxed at its own rates, lower than salary because the company has already paid Corporation Tax. Rates are 8.75% basic, 33.75% higher and 39.35% additional.
The dividend allowance has been cut to just £500 — down from £5,000 in 2017 — so most investors and company directors now pay dividend tax.
Formula & worked example
Tax = 8.75% / 33.75% / 39.35% depending on which band the dividends fall into
Worked example: £30,000 salary plus £25,000 in dividends. Salary uses the Personal Allowance and £17,430 of the basic band, leaving £20,270 of basic band. After the £500 dividend allowance, £24,500 is taxable: £20,270 at 8.75% (£1,774) and £4,230 at 33.75% (£1,428) → £3,202.
How to use this uk dividend tax calculator
- Enter your total dividend income for the tax year.
- Enter salary and other income — it determines which band dividends fall into.
- Dividends are always treated as the top slice of income.
- Dividends inside an ISA or pension are entirely tax-free and should be excluded.
Smart tips
- Hold dividend-paying shares inside an ISA — dividends there are completely tax-free with no allowance limit.
- Company directors often blend a small salary with dividends, though the optimum shifted after the allowance cuts.
- Dividends stack on top of other income, so a salary rise can push dividends into a higher band.
- Transferring shares to a lower-earning spouse uses their allowance and possibly a lower band.
- You must file a self-assessment return if dividends exceed £10,000.
Frequently asked questions
What is the dividend allowance for 2026?
£500, cut from £1,000 the previous year and £5,000 back in 2017. Dividends above this are taxable.
What are the dividend tax rates?
8.75% for basic-rate taxpayers, 33.75% for higher-rate and 39.35% for additional-rate.
Are ISA dividends taxed?
No. Dividends received inside an ISA are entirely free of UK tax and do not use your dividend allowance.
Do I need to file a tax return for dividends?
Yes if dividends exceed £10,000. Below that, HMRC can often collect the tax through your tax code.
Want the theory behind the numbers? Read our UK tax guides on the Money Blog.