Answers · UK 2025/26

How much tax do company directors pay on dividends in 2026?

For 2026/27, dividends are tax-free up to a £500 allowance, then taxed at 10.75% in the basic-rate band, 35.75% at higher rate and 39.35% at additional rate. A director taking £40,000 of dividends on top of a small salary would pay roughly £4,800 in dividend tax.

Last updated: 1 June 2026Last reviewed: 1 June 2026How we verify

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Company directors who pay themselves through dividends face dividend tax on top of the corporation tax already paid by the company. For 2026/27 the dividend allowance is £500 (taxed at 0%). Above that, dividend tax rates are 10.75% for income within the basic-rate band, 35.75% within the higher-rate band, and 39.35% above £125,140. Note these are the 2026/27 rates. Dividends do not attract National Insurance, which is why a salary-plus-dividend split is common. Worked example: a director takes a £12,570 salary (using the Personal Allowance) plus £40,000 in dividends. The first £500 of dividends is covered by the allowance. The next £37,200 (taking total income to the £50,270 higher-rate threshold) is taxed at 10.75% = £3,999. The remaining £2,300 falls into the higher-rate band at 35.75% = £822. Total dividend tax is about £4,821. The company must also pay corporation tax (19% on profits up to £50,000, 25% above £250,000, with marginal relief between) before the profit can be distributed. Scotland uses the same UK-wide dividend rates because dividend taxation is not devolved, though Scottish Income Tax bands affect the salary portion. Directors should also note the £500 allowance gives very little planning headroom. Use the Dividend Tax and Corporation Tax calculators to optimise your salary/dividend mix.