How Dividend Tax Works in 2026/27
Dividends are paid from company profits that have already been taxed through corporation tax. As a shareholder you then pay dividend tax on what you receive, but only above two allowances: any unused Personal Allowance (£12,570 for most people) and the separate £500 dividend allowance. Dividends are treated as the top slice of your income, so your salary and other income fill your tax bands first and your dividends are taxed at the rate of whichever band they land in.
Dividend Tax Rates 2026/27
| Band | Rate |
|---|
| Basic rate (total income up to £50,270) | 10.75% |
| Higher rate (£50,271 – £125,140) | 35.75% |
| Additional rate (over £125,140) | 39.35% |
| Dividend allowance | £500 tax-free |
The basic and higher dividend rates rose by 2 percentage points from 6 April 2026 (announced in the Autumn 2025 Budget) — from 8.75% to 10.75% and from 33.75% to 35.75%. The additional rate is unchanged at 39.35%. The £500 dividend allowance is also unchanged.
How Dividend Tax Is Calculated
- Add together your salary and other taxable income, then add your dividends.
- Deduct your Personal Allowance (£12,570, reduced by £1 for every £2 of income over £100,000).
- Deduct the £500 dividend allowance from your dividends.
- Stack the remaining dividends on top of your other income and apply the dividend rate for each band they fall into.
Worked Example
A director takes a £12,570 salary (covered by the Personal Allowance) and £50,000 in dividends. The first £500 of dividends is covered by the dividend allowance. Of the remaining £49,500, roughly £37,700 falls in the basic-rate band at 10.75% (£4,053) and about £11,800 falls in the higher-rate band at 35.75% (£4,219) — a dividend tax bill of approximately £8,272. Because the £12,570 salary uses the Personal Allowance, no income tax is due on the salary.
Who Should Use This Calculator?
This calculator suits limited company directors taking a salary-plus-dividends income, shareholders and investors receiving dividends outside an ISA, and anyone planning their 2026/27 extraction strategy. To model corporation tax, salary and dividends together, use our Limited Company Tax Calculator. For help reporting dividends through Self Assessment, see our Self Assessment service, and for ongoing company tax planning see our limited company accountants.
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