Answers · UK 2025/26
How much tax do I pay on dividends in the UK 2025/26?
The dividend allowance for 2025/26 is £500. Above that: basic rate taxpayers pay 8.75%, higher rate 33.75%, additional rate 39.35%. Dividends in an ISA or pension are fully tax-free.
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UK dividend tax for 2025/26: every individual gets a £500 dividend allowance taxed at 0% (down from £1,000 in 2023/24 and £2,000 before that). Above this, dividends are added on top of your other taxable income to determine the band. Rates: ordinary rate 8.75% (basic-rate band), upper rate 33.75% (higher-rate band), additional rate 39.35% (additional-rate band). Dividends use up basic-rate band before being charged at higher rates. Example: salary £40,000 + dividends £10,000. The first £500 dividend is tax-free. Of the remaining £9,500 dividend, £10,270 is in the basic-rate band (£50,270 − £40,000), so all £9,500 is at 8.75% = £831. Dividends held inside an ISA or SIPP are completely tax-free. Director-shareholders of limited companies typically optimise by taking a small salary up to the NI threshold (£12,570) and the rest as dividends — saving employer NIC.
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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.