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Dividend tax explained
What is dividend tax?
Dividend tax is the tax on dividends you receive when a company you’re a shareholder of makes a profit and pays some of that profit out to you. Dividends count as a type of income, so you may need to pay tax on them depending on your total dividend income.
How it works
Dividend income is added to the rest of your taxable income for the tax year. You get a dividend allowance that lets you earn a certain amount of dividend before you need to pay income tax. Any dividends above this allowance are taxed at a rate that depends on your income tax band.​
So if your tax band changes because of adding your dividend income to your other income, the rate of dividend tax you pay changes too.
Dividend allowance
The dividend allowance sets out how much dividend income you can receive before paying tax.​
For the 2025/2026 and 2026/2027 tax years, the dividend allowance is £500 (this is on top of your personal allowance)​.
The standard personal allowance is £12,570 for 2025/2026 and 2026/2027.
How much dividend is tax free?
If your total income (including dividends) stays within your personal allowance and your dividend income stays under the £500 dividend allowance, you won’t pay dividend tax.​
You’ll only pay dividend tax if:​
- what you earn goes over your Personal Allowance
- your dividend income is more than £500.​
Always check the latest allowance on the GOV.UK website.
Dividend tax rates
Once your dividend income goes over the dividend allowance, you’ll pay tax based on your income tax band.​
Dividend tax rates for 2025/26 and 2026/27
|
Income tax band |
Dividend tax rate 2025/2026 |
Dividend tax rate 2026/2027 |
|---|---|---|
|
Income tax band Basic rate (income £12,571 to £50,270) |
Dividend tax rate 2025/2026 8.75% |
Dividend tax rate 2026/2027 10.75% |
|
Income tax band Higher rate (income £50,271 to £125,140) |
Dividend tax rate 2025/2026 33.75% |
Dividend tax rate 2026/2027 35.75% |
|
Income tax band Additional rate (income over £125,140) |
Dividend tax rate 2025/2026 39.35% |
Dividend tax rate 2026/2027 39.75% |
For the latest rates, always check the GOV.UK website.
How much dividend tax will you pay?
Below are 2 examples to show how much tax you pay on dividends, depending on income, allowance and tax band.​
How to pay tax on dividends
How you report and pay dividend tax depends on the amount you’ve earned.​
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