What are the dividend tax rates in the UK for 2026/27?

Full answer

Dividend tax in the UK applies to dividend income received outside of tax-free wrappers (ISA, pension). The tax-free Dividend Allowance has been progressively reduced from GBP 5,000 in 2017/18 to just GBP 500 from April 2024. Dividend Allowance GBP 500 per year (2026/27, unchanged from 2024/25). Dividends within the allowance are tax-free but use up the basic-rate band, which can affect the tax rate on other income above the allowance. Dividend tax rates (on dividends above the GBP 500 allowance) -- Basic rate taxpayers: 8.75% -- Higher rate taxpayers: 33.75% -- Additional rate taxpayers (income over GBP 125,140): 39.35% Top-slicing: dividends are treated as the top slice of income. Other income (salary, rental, savings) fills up the tax bands first, and dividends are then assessed against the remaining band capacity. Tax-free wrappers Dividends within a Stocks and Shares ISA or a pension are completely free of dividend tax (and CGT). The ISA annual subscription limit is GBP 20,000 in 2026/27. Self Assessment reporting You must report dividend income on Self Assessment if: -- Total dividends received exceed GBP 500, or -- You are already required to file SA for another reason Higher and additional rate taxpayers with dividends from, say, a company they own will typically owe dividend tax to pay via Self Assessment by 31 January. Director shareholders For owner-managed companies, the optimal salary/dividend split involves paying a salary of GBP 12,570 (full personal allowance) or GBP 9,100-12,570 (to avoid employer NI), then extracting remaining profits as dividends. The first GBP 500 of dividends is free; the remainder is taxed at 8.75% to the extent it falls within the basic rate band.

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