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. From 6 April 2026 the rates are 10.75% basic, 35.75% higher and 39.35% additional — the basic and higher rates rose by 2 percentage points at Budget 2025.
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 = 10.75% / 35.75% / 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 10.75% (£2,179) and £4,230 at 35.75% (£1,512) → £3,691.
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 in 2023-24 and £5,000 back in 2017-18. Dividends above this are taxable.
What are the dividend tax rates?
From 6 April 2026: 10.75% for basic-rate taxpayers, 35.75% 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? Browse the Money Blog for worked guides.
Written by Gurjeet Singh, Sharpen Solutions. Last reviewed 15 Oct 2026. Sources: GOV.UK — Tax on dividends: allowance and rates. How we check these numbers.