How the dividend tax calculator works
Dividends are taxed differently from wages. The calculator first uses up your £12,570 Personal Allowance against your other income, such as salary, then against your dividends. The next £500 of dividends falls under the dividend allowance and is taxed at 0%. Anything above that is taxed at the dividend rate for the band it lands in, with dividends always treated as the top slice of your income.
This order matters. A large salary pushes your dividends up into the higher rate band, which is why the calculator needs to know about your other income as well.
Dividend tax rates for 2026/27
From 6 April 2026 the basic and higher dividend rates went up by 2 percentage points. The additional rate stayed the same, and the dividend allowance is still £500.
| Tax band | Total taxable income | 2025/26 rate | 2026/27 rate |
|---|---|---|---|
| Dividend allowance | First £500 of dividends | 0% | 0% |
| Basic rate | £12,571 to £50,270 | 8.75% | 10.75% |
| Higher rate | £50,271 to £125,140 | 33.75% | 35.75% |
| Additional rate | Over £125,140 | 39.35% | 39.35% |
The dividend allowance isn't extra tax-free income on top of your bands. The £500 still uses up part of your basic or higher rate band, so it can push later dividends into a higher band.
Scottish taxpayers pay dividend tax at these UK rates and bands. Only salary, pensions and rental profits use the Scottish income tax rates.
Worked example: salary of £12,570 and £20,000 of dividends
This is a common set-up for company directors. The £12,570 salary uses all of the Personal Allowance, so none of it is taxed.
- First £500 of dividends: dividend allowance at 0%
- Remaining £19,500: all within the basic rate band, taxed at 10.75% = £2,096.25
In 2025/26 the same dividends cost £1,706.25 at 8.75%, so the rise adds £390 to the bill.
Example: higher-rate taxpayer with £10,000 of dividends
With a salary of £50,270 you've already used the whole basic rate band. The first £500 of dividends is covered by the allowance, and the other £9,500 is taxed at 35.75%, giving £3,396.25.
Example: salary of £40,000 and £30,000 of dividends
Your salary uses £27,430 of the £37,700 basic rate band. The £500 allowance takes up the next slice, £9,770 of dividends fills the rest of the band at 10.75% (£1,050.28) and the final £19,730 is taxed at 35.75% (£7,053.48). Total dividend tax: £8,103.75.
Paying dividend tax
- Up to £500: nothing to pay or report.
- £500 to £10,000: tell HMRC. You can ask them to change your tax code so the tax comes out of your wages, or include it on a Self Assessment return if you already file one.
- Over £10,000: you must register for Self Assessment. The bill for 2026/27 is due by 31 January 2028, and you may need payments on account.
Ways to reduce dividend tax
- Hold shares in a stocks and shares ISA, where dividends are tax-free. You can pay in up to £20,000 a year.
- If you're married or in a civil partnership, transferring shares to a spouse who pays less tax can use both allowances.
- Directors can make employer pension contributions from the company, which can be more tax-efficient than taking extra dividends. See the pension calculator for how a pot grows.
- Compare with other routes using the income tax calculator and the take-home pay calculator.
Frequently asked questions
What is the dividend allowance for 2026/27?
The dividend allowance is £500 for 2026/27. The first £500 of dividends you receive outside an ISA or pension is taxed at 0%.
What are the dividend tax rates from April 2026?
From 6 April 2026 dividends are taxed at 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band. The basic and higher rates each rose by 2 percentage points.
How much tax do I pay on £10,000 of dividends?
If your salary already uses your Personal Allowance and you stay a basic-rate taxpayer, you pay £1,021.25: 10.75% on the £9,500 above the £500 allowance. A higher-rate taxpayer pays £3,396.25.
Do I pay dividend tax on shares in an ISA?
No. Dividends from shares held in a stocks and shares ISA or a pension are completely tax-free and don't use your dividend allowance.
Do Scottish taxpayers pay different dividend tax?
No. Dividends are taxed at the UK rates of 10.75%, 35.75% and 39.35% wherever you live, using the UK band limits.
Last reviewed October 2026 using 2026/27 figures. This calculator gives an estimate for guidance only.