Answers · UK 2025/26
How much tax do you pay on dividends in 2026/27?
In 2026/27, the first £500 of dividends is tax-free (the dividend allowance), then you pay 10.75% if basic rate, 35.75% if higher rate, or 39.35% if additional rate taxpayer.
Full answer
Dividends are taxed separately from other income in the UK, at lower rates than employment income — but the dividend allowance has been cut significantly in recent years. **2026/27 dividend tax rates:** | Taxpayer band | Dividend tax rate | |---|---| | Within Dividend Allowance | **0%** (first £500) | | Basic rate (£12,571–£50,270) | **10.75%** | | Higher rate (£50,271–£125,140) | **35.75%** | | Additional rate (above £125,140) | **39.35%** | **Dividend allowance history:** | Tax year | Allowance | |---|---| | 2022/23 | £2,000 | | 2023/24 | £1,000 | | 2024/25 onwards | **£500** | **How dividends interact with the tax bands:** Dividends are taxed as the "top slice" of your income — added on top of employment, pension and rental income when calculating which band applies. **Director salary + dividend strategy:** Owner-managed company directors typically pay themselves a salary up to the NI threshold (around £12,570/year, as higher salary saves income tax but triggers NI + employer NI), then take additional income as dividends — taxed at 10.75% rather than 20% + NI. **Dividends within an ISA:** Dividends received within a **Stocks & Shares ISA** are completely tax-free — no dividend tax, no need to declare them. The £20,000 annual ISA allowance makes this the most tax-efficient way to hold dividend-paying assets. **How to declare dividends:** If your total taxable dividends exceed the £500 allowance, you must declare them via **Self Assessment**. HMRC typically pre-populates your return with data from share registrars.
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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.