Calculate your dividend tax liability for the 2026/27 tax year.
Dividends are added to your other income and taxed at their own rates. The first £500 of dividends is tax-free (the dividend allowance), then taxed based on which income tax band they fall into.
Many company directors pay themselves a small salary (often £12,570) to use their personal allowance, then take additional income as dividends for tax efficiency.
HMRC stacks your income in a set order, and the order matters.
Your personal allowance shrinks by £1 for every £2 of income over £100,000 and disappears at £125,140. Dividends count towards that £100,000, so a large one-off dividend can cost you part of your allowance.
The salary is covered by the personal allowance, so there's no income tax. That leaves £37,700 of basic rate band. The first £500 of dividends uses the allowance, the next £37,200 is taxed at 10.75% (£3,999.00), and the last £2,300 spills into the higher rate band at 35.75% (£822.25). Total dividend tax: £4,821.25.
Income tax on the salary is £3,486. The dividends all fall in the basic rate band: £500 at 0% and £4,500 at 10.75%, which is £483.75. Total tax: £3,969.75.
Only £5,270 of basic rate band is left after the salary. The £500 allowance takes some of it, £4,770 is taxed at 10.75% (£512.78), and the remaining £9,730 is taxed at 35.75% (£3,478.48). Dividend tax: £3,991.25, on top of £6,486 income tax on the salary.
These use rest-of-UK income tax rates for the salary. Scottish taxpayers pay Scottish rates on salary, but dividends are taxed at the UK dividend rates and bands above.
The dividend allowance is £500 for the 2026/27 tax year. The first £500 of dividends above your personal allowance is taxed at 0%.
Yes. Dividends covered by the £500 allowance are taxed at 0%, but they still count towards your basic and higher rate bands. If your dividends cross into the higher rate band, that can cost up to £125 more than you might expect (£500 at 35.75% instead of 10.75%).
Yes. Salary is taxed first. If your salary is below £12,570, the unused part of your personal allowance covers dividends before the £500 dividend allowance applies.
If your dividends are over £10,000 you must file a Self Assessment tax return, and the tax is due by 31 January after the end of the tax year (31 January 2028 for 2026/27). Between £500 and £10,000, you can instead ask HMRC to collect it through your tax code.
No. Dividends from shares held in an ISA or a pension are tax-free and do not use your dividend allowance.
Sources: GOV.UK: Tax on dividends and GOV.UK: Income Tax rates and Personal Allowances. General information, not financial advice.
| Personal Allowance | £12,570 |
| Basic Rate | £12,571-£50,270 |
| Higher Rate | £50,271-£125,140 |
| Additional Rate | Over £125,140 |