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Your Dividend Tax
Based on 2026/27 HMRC dividend tax rates. This is an estimate — seek professional advice for complex situations.
How Does UK Dividend Tax Work in 2026/27?
Dividend tax applies to company profit distributions received from shares in personal limited companies or listed equities. Because company profits have already been subject to UK Corporation Tax, dividend tax rates (8.75%, 33.75%, 39.35%) are lower than standard PAYE rates.
What is the UK Dividend Allowance for 2026/27?
Every individual receives a statutory tax-free dividend allowance of £500 for the 2026/27 tax year. Dividends within this £500 allowance incur 0% tax regardless of whether you are a basic, higher, or additional rate taxpayer.
What are the Official UK Dividend Tax Rates for 2026/27?
For the 2026/27 tax year, dividend income exceeding the £500 allowance is taxed according to which income tax band the stacked dividends fall into.
| Income Tax Band | Total Taxable Income Range | Dividend Tax Rate | Comparison PAYE Rate |
|---|---|---|---|
| Personal Allowance | Up to £12,570 | 0% | 0% |
| Basic Rate | £12,571 – £50,270 | 8.75% | 20% |
| Higher Rate | £50,271 – £125,140 | 33.75% | 40% |
| Additional Rate | Over £125,140 | 39.35% | 45% |
How Does Salary vs Dividend Income Stacking Work for Directors?
For limited company directors, the primary tax advantage of dividends is that no National Insurance is charged on dividend income. Combining an optimal salary of £12,570 with dividends avoids 8% employee NI and 15% employer NI.
Step-by-Step Dividend Tax Calculations (Worked Examples)
The worked examples below show how the £500 allowance, salary stacking, and dividend tiers calculate net tax liabilities.
Optimal Director (£12,570 + £30k Divs)
Mid Earner (£30k Salary + £40k Divs)
Higher Earner (£80k Salary + £60k Divs)
Frequently Asked Questions
The UK dividend allowance for 2026/27 is £500 per individual. The first £500 of dividend income is 100% tax-free regardless of your tax band.
Statutory UK dividend tax rates for 2026/27 are: Basic rate (8.75%), Higher rate (33.75%), and Additional rate (39.35%) applied to dividends exceeding the £500 allowance.
Dividends are stacked on top of your earned salary. Your salary uses up your £12,570 Personal Allowance and Basic Rate band first; remaining dividend amounts are taxed at 8.75%, 33.75%, or 39.35%.
Taking a salary up to the Primary NI threshold (£12,570) with remainder as dividends is standard for company directors because dividends are exempt from 8% employee and 15% employer National Insurance.
No. Dividend distributions are not subject to Class 1 employee or employer National Insurance contributions, saving substantial payroll taxes.
You must register and file a Self Assessment return if your taxable dividend income exceeds £10,000, or if tax owed cannot be collected via PAYE tax code adjustments.