Answers · UK 2025/26
What is the dividend allowance UK 2025/26?
The dividend allowance for 2025/26 was £500 — the same as 2024/25. Dividends up to £500 are tax-free regardless of your tax band. In 2025/26 dividends above the allowance were taxed at 8.75% (basic), 33.75% (higher) and 39.35% (additional); from 6 April 2026 the ordinary and upper rates rose 2pp to 10.75% and 35.75%.
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The dividend allowance was cut from £2,000 (2022/23) to £1,000 (2023/24) and then to £500 from April 2024, where it remained for 2025/26 and 2026/27. How it works: your dividends are stacked on top of your other income for the purposes of calculating your marginal rate. Allowance is used first; the excess is taxed at the dividend rate appropriate to your band. Rates 2025/26: basic rate 8.75%, higher rate 33.75%, additional rate (above £125,140) 39.35%. From 6 April 2026 (2026/27) the ordinary and upper rates rose by 2 percentage points to 10.75% and 35.75% (additional rate unchanged). For a higher-rate taxpayer receiving £4,000 of dividends in 2025/26: £500 is tax-free; the remaining £3,500 is taxed at 33.75% = £1,181.25 (at the 2026/27 rate of 35.75% this would be £1,251.25). Dividends within an ISA are always tax-free regardless of amount. Pension income and salary are not dividends — dividend rates only apply to actual distributions from shares.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.