Answers · UK 2025/26
Do I pay National Insurance on dividends?
No. Dividends are investment income, not earned income, so they are exempt from National Insurance. You pay only dividend tax: 0% on the £500 dividend allowance, then 8.75% (basic), 33.75% (higher) or 39.35% (additional) in 2025/26 depending on your total income band.
Full answer
Dividends sit outside the NI system because NI only attaches to earnings from employment or self-employment trading profits. This is a key reason why limited-company directors often pay themselves a small "tax-efficient" salary close to the Primary Threshold (£12,570) and take the rest as dividends — no employee or employer NI applies to the dividend portion. Dividend tax rates for 2025/26: £500 dividend allowance taxed at 0%, then 8.75% in the basic-rate band, 33.75% in the higher-rate band and 39.35% in the additional-rate band. Dividends use your basic Personal Allowance first if there is room. Example: salary £12,570 + dividends £40,000. Tax: £500 at 0%; the next £37,200 at 8.75% = £3,255; the remaining £2,300 at 33.75% = £776. Total dividend tax £4,031. Compare carefully to a salary-only route when planning director pay.
Try the calculator
More answers
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.