Dividend Tax 2026/27: How Much Will You Pay?

What are the dividend tax rates for 2026/27?

Dividends have their own tax rates, lower than the rates on salary. After the £500 tax-free dividend allowance, the rate you pay depends on which income tax band the dividends fall into once they are added to your other income.

These rates apply right across the UK, including Scotland. Dividends are not devolved, so Scottish taxpayers use the same dividend rates as everyone else even though their income tax bands differ.

How the dividend allowance works

Everyone gets a £500 dividend allowance for 2026/27. Dividends within this amount are taxed at 0%, no matter how much you earn. It has shrunk sharply in recent years — it was £2,000 as recently as 2022/23 — so far more people now pay dividend tax.

Importantly, the allowance still uses up part of your tax band. It is taxed at 0% but it counts towards your total income, which can affect how much of your other income falls into the higher-rate band.

Dividends stack on top of your other income

Dividends are treated as the top slice of your income. That means your salary, pension or self-employed profit is taxed first and fixes your starting point; the dividends are then taxed at the dividend rate for whichever band they land in.

Any part of your £12,570 personal allowance that your other income does not use can also be set against dividends, on top of the £500 dividend allowance. So someone with little or no salary can receive a useful amount of dividends tax-free.

Worked examples for 2026/27

The examples below assume the standard £12,570 personal allowance and that dividends sit on top of the salary shown. They show the dividend tax only — income tax and National Insurance on the salary are separate.

Dividend tax for limited company directors

Many company directors pay themselves a small salary plus dividends, because dividends carry no National Insurance and are taxed at lower rates than salary. Dividends are paid from company profit after Corporation Tax, so they are not a tax-free shortcut — the company has already paid tax on those profits.

A common approach is a salary around the National Insurance or personal allowance threshold, topped up with dividends. The right split depends on your profit, other income and Corporation Tax position, so it is worth getting tailored advice from an accountant.

• Dividends must be paid from retained profit and properly recorded with a dividend voucher.
• You cannot pay dividends if the company does not have enough distributable profit.
• Dividends do not reduce the company's Corporation Tax bill, unlike salary.

How to pay less dividend tax legitimately

The simplest move for investors is to hold shares and funds inside a Stocks & Shares ISA. Dividends inside an ISA are entirely tax-free and do not use your £500 allowance, and you can shelter up to £20,000 a year across ISAs.

Couples can also consider holding investments in the name of the lower earner, or jointly, so more dividends fall within a lower band or unused allowances. Pension contributions can keep your other income below the higher-rate threshold, lowering the rate on your dividends.

• Use a Stocks & Shares ISA to make dividends tax-free.
• Share investments with a spouse or civil partner to use both allowances and bands.
• Keep an eye on the higher-rate threshold — crossing it lifts your dividend rate from 8.75% to 33.75%.

How and when to pay dividend tax

If your only dividend income is small, you may not need to do anything — but most people who owe dividend tax report it through Self Assessment. If dividends are below £10,000, HMRC may be able to collect the tax through your PAYE tax code instead; above that you generally need to register for Self Assessment.

Use our Dividend Tax Calculator to estimate what you owe for 2026/27, and the Income Tax Calculator to see how your salary uses up the tax bands first. These are estimates — always check GOV.UK and keep records of dividends received.