How much tax do you pay on dividends?
The first £500 of dividends each year is tax-free (the Dividend Allowance). Dividends above that are taxed at 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band.
Dividends are the top slice of your income, so your salary and other income decide which band they start in. There is no National Insurance on dividends. Enter your figures above for an exact bill.
How dividend tax is calculated
Dividend tax is worked out in a set order. Your non-dividend income (salary, self-employment profit, pension, rental income) uses your £12,570 Personal Allowance first and fills the Income Tax bands from the bottom. Any Personal Allowance left over is then applied to your dividends at 0%.
Next comes the £500 Dividend Allowance, which taxes the following slice of dividends at 0% — but, unlike the Personal Allowance, it still uses up room in your tax bands. Whatever dividends are left are taxed at the dividend rate for the band they fall in: 10.75% in the basic rate band, 35.75% in the higher rate band, and 39.35% above.
The £500 Dividend Allowance
Every individual gets a Dividend Allowance of £500 a year, whatever their income. It is a 0% rate band, not a deduction, so it does not reduce your total income and it does count towards the thresholds that decide your Income Tax band. If your only dividends are £500 or less in a tax year, there is nothing to report and nothing to pay.
Dividend tax rates for 2026/27
| Band | Dividend rate |
|---|---|
| Covered by the Dividend Allowance | 0% |
| Basic rate band | 10.75% |
| Higher rate band | 35.75% |
| Additional rate band | 39.35% |
Dividend tax is not a devolved tax, so these rates and the UK-wide band widths apply to Scottish taxpayers too. Only the tax on your salary and other earned income uses the Scottish Income Tax bands.
Dividends from your own company
If you run a limited company, the profit your dividends are paid from has already been taxed at Corporation Tax. The dividend tax here is a second, personal charge on you as a shareholder. That two-layer picture is what the sole trader vs limited company comparison weighs up.
A common approach is a small salary (often around the National Insurance threshold) topped up with dividends, because dividends carry no National Insurance. Use the Corporation Tax calculator for the company side and this calculator for the personal side.
Example dividend tax calculations
These scenarios come straight from the calculator above.
Small salary + dividends
£12,570 other income · £30,000 dividends
- Dividend tax
- £3,171
- Effective rate
- 10.6%
Basic-rate employee
£35,000 other income · £5,000 dividends
- Dividend tax
- £484
- Effective rate
- 9.7%
Higher-rate director
£60,000 other income · £20,000 dividends
- Dividend tax
- £6,971
- Effective rate
- 34.9%
Frequently asked questions
01How much tax do I pay on dividends?
The first £500 of dividends each year is covered by the Dividend Allowance and taxed at 0%. Dividends above that are taxed at 8.75% while they fall in the basic rate band, 33.75% in the higher rate band and 39.35% in the additional rate band. Dividends are treated as the top slice of your income, so your salary and other income decide which band your dividends start in.
02Is the £500 Dividend Allowance a tax-free amount on top of my Personal Allowance?
Not quite. Any unused Personal Allowance is applied to your dividends first, at 0%. The £500 Dividend Allowance then covers the next slice of dividends at 0%, but unlike the Personal Allowance it still uses up room in your Income Tax bands, so it can push later dividends into a higher band.
03Do I pay National Insurance on dividends?
No. Dividends are not earnings, so there is no National Insurance on them for you or the company. This is one of the reasons a mix of a small salary and dividends is often more efficient for a company director than taking everything as salary — though the company has already paid Corporation Tax on the profit the dividends come from.
04Are dividend tax rates different in Scotland?
No. Dividend tax is not devolved, so Scottish taxpayers use the same 8.75%, 33.75% and 39.35% rates and the same UK-wide band widths for dividends. Only the tax on your non-dividend income (salary, self-employment, pension) uses the Scottish bands.
05How do I actually pay the tax on my dividends?
If your dividend income is £10,000 or more you must report it through Self Assessment. Below that, you can ask HMRC to collect the tax through your tax code or by sending a Self Assessment return. Dividends of £500 or less in a year mean nothing to report or pay.
06Are dividends from shares in an ISA taxed?
No. Dividends on shares and funds held inside a Stocks and Shares ISA are completely tax-free and do not count towards your Dividend Allowance or your bands. Do not include ISA dividends in this calculator.
What this calculator assumes
- Your dividends are from UK companies and are not held in an ISA.
- You have no savings interest above your Personal Savings Allowance and are not claiming the Marriage Allowance or the blind person's allowance.
- The “other taxable income” you enter is your income after any pension contributions and other reliefs — it is the figure your tax bands are actually measured against.
- All figures are rounded to the nearest penny.
Full source citations for every rate used are listed on the About & methodology page.
Sources
Dividend tax rates and the Dividend Allowance are taken directly from: