Dividend Tax UK 2026/26
Dividend income is taxed differently from salary income in the UK. You pay dividend tax on dividends you receive above the annual dividend allowance. This is relevant if you own shares (company director, investor, or shareholder) and receive dividends.
💡 Company directors: Many limited company directors pay themselves a combination of salary and dividends to optimise tax efficiency. Use our salary calculator for the employed salary element.
Dividend Allowance 2026/26
The dividend allowance for 2026/26 is £500. This means you can receive up to £500 in dividends tax-free each year (in addition to your personal allowance).
Dividend Tax Rates 2026/26
| Tax Band | Dividend Tax Rate |
|---|---|
| Basic Rate (income up to £50,270) | 8.75% |
| Higher Rate (income £50,271–£125,140) | 33.75% |
| Additional Rate (income over £125,140) | 39.35% |
Note: Dividends are added to your other income to determine which tax band they fall in.
Dividend Tax Calculation Example
You have a salary of £30,000 and receive £5,000 in dividends:
- £500 covered by dividend allowance = £0 tax
- Remaining £4,500 falls in the basic rate band = £4,500 × 8.75% = £393.75
Salary vs Dividends for Company Directors
For limited company directors, a common strategy is to:
- Pay a salary up to the NI threshold (£12,570) to avoid income tax and NI
- Take the remaining profits as dividends, taxed at the lower dividend rate (8.75% vs 20% income tax)