What is the dividend nil rate band in 2026/27?

Full answer

**What is the dividend allowance?** The dividend nil rate band (or dividend allowance) is an annual amount of dividend income on which you pay no additional tax. For 2026/27 it remains at £500 (unchanged from 2024/25 and 2025/26). Dividends within the allowance still count as income for other purposes (e.g. they can affect your personal allowance if your total income exceeds £100,000). **Dividend tax rates 2026/27** | Band | Rate on dividends | |---|---| | Up to £500 (nil rate band) | 0% | | Basic rate (income up to £50,270) | 8.75% | | Higher rate (income £50,271–£125,140) | 33.75% | | Additional rate (income above £125,140) | 39.35% | **How dividends interact with other income** Dividends are treated as the top slice of income. Your personal allowance (£12,570) and other income bands are first used against non-dividend income (salary, rental income, etc.). **Example: Sarah, basic-rate taxpayer** Sarah earns £35,000 salary. She also receives £3,000 dividends from shares. - £12,570 personal allowance used against salary - £22,430 salary taxed at 20% - £500 dividend allowance: 0% on first £500 of dividends - £2,500 dividends in basic-rate band: 8.75% = £218.75 tax **Example: David, director taking dividends** David takes £50,000 salary and £30,000 dividends. - £12,570 personal allowance against salary - £37,430 salary at 20% = £7,486 - Remaining basic-rate band: £50,270 − £50,000 (salary) = £270 - £270 dividends at 8.75% = £23.63 - £500 − £270 = £230 of allowance wasted (dividends above basic band) - £29,730 − £230 dividend allowance used = wait, applying correctly: first £500 dividend allowance = £0 tax, then £270 at 8.75%, then remaining £29,230 at 33.75% = £9,865 **Planning** For owner-managed companies, keeping total income below £50,270 maximises use of the 8.75% rate. The £500 allowance is modest — larger dividend income benefits most from ISA sheltering.