Dividend Tax Rates 2026-27 Explained
Dividend allowance, basic rate, higher rate, and the additional rate — all 2026-27 rates with examples of how much tax you'll pay.
2026-27 dividend tax rates at a glance
- Dividend allowance: £500 (tax-free)
- Basic rate band: 8.75%
- Higher rate band: 33.75%
- Additional rate (above £125,140): 39.35%
How the dividend allowance works
The first £500 of dividend income each year is tax-free regardless of your other income. This allowance was £2,000 before April 2023, reduced to £1,000 from April 2023, and cut again to £500 from April 2024. No further changes are confirmed for 2026-27.
How dividends stack on top of salary
Dividends are always treated as the top slice of income. Your salary fills the income bands first, then dividends sit on top. Example:
- Salary: £12,570 (uses the personal allowance)
- Dividends: £30,000
- Total income: £42,570
- Dividend allowance: first £500 is tax-free
- Remaining £29,500 in the basic rate band → £29,500 × 8.75% = £2,581.25 dividend tax
The £100,000 trap
When total income (salary + dividends) exceeds £100,000, the personal allowance tapers at £1 for every £2 of income above the threshold. By £125,140 the personal allowance is fully withdrawn. The effective marginal rate through this band can reach 60%. Pension contributions are the main mitigation — they reduce adjusted net income and restore the personal allowance.
Related calculators
Frequently asked questions
Is the dividend allowance the same as being tax-free?
Do I need to declare dividends on a Self Assessment return?
What was the dividend allowance before 2023?
Disclaimer: This guide is for general information only and does not constitute tax or legal advice. Tax rules change — always verify rates and thresholds with HMRC or a qualified accountant before making decisions. HMRC website