Dividend Tax · 2025/26
Dividend Tax on £1,000 — UK 2025/26
On £1,000 of dividend income for 2025/26 (assuming this is your only income), you pay £44 in dividend tax — an effective rate of 4.38% across the full amount. The first £500 is covered by the dividend allowance; the rest is taxed at 8.75%, 33.75% or 39.35% depending on which band it lands in.
Band-by-Band Breakdown
How dividend tax works in 2025/26
UK dividend tax is charged on top of any other income you receive. HMRC stacks your income in this order: non-savings income (salary, pension, rental), then savings, then dividends on top. The first £500 of dividends each tax year is covered by the dividend allowance and is tax-free regardless of which band you sit in. Above that, dividends are taxed at lower rates than salary because no National Insurance is due.
The three dividend rates for 2025/26 are 8.75% within the basic-rate band, 33.75% within the higher-rate band, and 39.35% above the additional-rate threshold of £125,140. For £1,000 of dividends with no other income, the personal allowance of £12,570 first absorbs the base of the stack, then the £500 dividend allowance, then the remainder is charged at the rates shown above.
If you also receive a salary or pension, that other income uses part of the basic-rate band first — pushing more of your dividends into the higher or additional rate. Owner-managers commonly take a small salary up to the personal allowance and the rest as dividends, which is why dividend tax features so heavily in director and contractor tax planning.