UK dividend tax rates and allowance, by tax year
Dividends are taxed differently from a salary or trading profit, and the rules have tightened sharply over the last few years. The tax-free allowance has been cut from £2,000 to £500, so a dividend income that produced no tax bill in 2022-23 can produce a real one now. Here's how it works and what's changed.
The Dividend Allowance, year by year
Everyone gets a tax-free Dividend Allowance. Dividends within it are still counted as income (they can push your other income into a higher band), but no dividend tax is charged on them.
| Tax year | Dividend Allowance |
|---|---|
| 2022-23 | £2,000 |
| 2023-24 | £1,000 |
| 2024-25 | £500 |
| 2025-26 | £500 |
| 2026-27 | £500 |
Dividend tax rates by year
Above the allowance, the rate depends on which Income Tax band the dividends fall into. Dividends sit on top of your other income, so they're taxed at the band that income reaches. The rates held steady from 2022-23 to 2025-26, then the basic and higher rates went up by two points from 6 April 2026:
| Band | 2022-23 to 2025-26 | 2026-27 |
|---|---|---|
| Basic rate | 8.75% | 10.75% |
| Higher rate | 33.75% | 35.75% |
| Additional rate | 39.35% | 39.35% |
These are still lower than the rates on earned income, which is part of why company directors often take profit as dividends rather than salary, though the gap has narrowed. The estimator on this site covers tax years up to 2025-26, the year you file for by 31 January 2027.
How dividends stack: a worked example
Say you have £30,000 of salary and £10,000 of dividends in 2025-26. Your Personal Allowance covers the first £12,570. The salary uses up the rest of the allowance and part of the basic-rate band. The dividends sit on top: £500 is covered by the Dividend Allowance, and because your total income is still within the basic-rate band, the remaining £9,500 is taxed at 8.75%, which is £831.25 of dividend tax.
The same income in 2026-27 costs more. £9,500 at 10.75% is £1,021.25, an extra £190 for exactly the same dividends. HMRC's own GOV.UK example: £29,570 of wages and £3,000 of dividends leaves £2,500 taxable after the allowance, at 10.75%.
Now push the numbers up. With £45,000 of salary and £10,000 of dividends, some of the dividends spill into the higher-rate band and are taxed at 33.75%. This is why two people with the same dividend income can pay very different amounts. It depends entirely on what other income sits underneath.
Why the cuts matter
When the allowance was £2,000, plenty of small investors and directors paid no dividend tax at all. At £500, far more people are pulled into it. If you take dividends from your own company, it's worth reviewing your salary-versus-dividend mix each year rather than assuming last year's plan still works. For the bigger structural question, see sole trader vs limited company.
Reporting dividends
If your dividend income is above the allowance you'll generally need to report it through Self Assessment. Keep your dividend vouchers and the dates, since dividends are taxed in the year they're paid. As always, the order of the calculation matters: dividends are handled after your main income, with their own allowance and rates.
Frequently asked questions
What are the dividend tax rates for 2026/27?
10.75% for basic-rate taxpayers, 35.75% for higher-rate taxpayers and 39.35% for additional-rate taxpayers, on dividends above the £500 Dividend Allowance. The basic and higher rates rose by two points from 6 April 2026.
What were the dividend tax rates for 2024/25 and 2025/26?
8.75% basic rate, 33.75% higher rate and 39.35% additional rate in both years, with a £500 Dividend Allowance.
How much dividend income is tax-free?
The first £500 of dividends each year, under the Dividend Allowance, which has been £500 since 2024-25. It was £1,000 in 2023-24 and £2,000 in 2022-23. Dividends from shares held in an ISA are tax-free and do not use the allowance.
Is dividend tax different in Scotland?
No. Scotland sets its own rates for earned income, but dividends are taxed at the same UK rates and with the same £500 allowance in Scotland as everywhere else.
How many dividends can I take per year in the UK?
There is no limit on how many dividends a company pays. The tax depends on the total amount you receive in the tax year, not on how many payments it is split into.
Is there a dividend tax calculator?
Yes. The estimator on this site takes your salary, profit and dividends and shows the Dividend Allowance and each dividend band on its own line, for tax years 2022-23 to 2025-26. It is an estimate, not an HMRC calculation.