2026/27 Tax Year

How Much Dividend Tax Will I Pay?

Q: How much dividend tax will I pay?

The first £500 of dividend income is tax-free (the dividend allowance). Above that, dividends are taxed at 8.75% within the basic rate band, 33.75% within the higher rate band, and 39.35% within the additional rate band, based on your total income including the dividends.

Q: Do I need to file a tax return for dividend income?

If your dividend income is above the £500 allowance, you generally need to report it via Self Assessment. HMRC may also collect small amounts through a tax code adjustment if you're also employed.

Q: Why are dividend tax rates lower than Income Tax rates?

Dividends are paid out of company profits that have already had Corporation Tax deducted, so dividend tax rates are set lower than salary tax rates to reflect that the underlying profit has already been taxed once.

By Rasika F.

Updated July 2026 • PayToolkit

The dividend allowance and dividend tax rates explained | Updated 5 September 2026

Last Updated5 September 2026

Quick Answer

The first £500 of dividend income is tax-free. Above that, dividends are taxed at 8.75% (basic rate), 33.75% (higher rate), or 39.35% (additional rate), depending on your total income.

The Dividend Allowance

Everyone gets a £500 tax-free dividend allowance for 2026/27, regardless of what other income they have. This sits on top of your Personal Allowance — you don't need to have used up your Personal Allowance to benefit from it.

Dividend Tax Rates

Band	Rate
Dividend allowance (first £500)	0%
Basic rate band	8.75%
Higher rate band	33.75%
Additional rate band	39.35%

Worked Example

You have a salary of £30,000 and receive £5,000 in dividends. The first £500 of dividends is tax-free. The remaining £4,500 falls within the basic rate band (since your combined income is under £50,270), so it's taxed at 8.75%, giving a dividend tax bill of £393.75.

How to Report and Pay

If your dividend income exceeds the £500 allowance, you generally need to report it through Self Assessment. Small amounts can sometimes be collected via a tax code adjustment if you're also employed, but most people with meaningful dividend income need to file a return.

Frequently Asked Questions

How much dividend tax will I pay?

The first £500 is tax-free. Above that: 8.75% basic rate, 33.75% higher rate, 39.35% additional rate.

Is the dividend allowance separate from my Personal Allowance?

Yes, the £500 dividend allowance is separate from the £12,570 Personal Allowance, though dividends still count toward your total income.

Do I need to file a tax return for dividend income?

Generally yes, via Self Assessment, if your dividends exceed the £500 allowance.

Why are dividend tax rates lower than Income Tax rates?

Because the underlying company profit has already had Corporation Tax deducted before being paid out as a dividend.

Sources & Methodology

GOV.UK: Tax on dividends

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