by Asim Abbas
11 November 2026 
Dividend tax 2026/27: new rates and how to work out your bill
Dividend tax 2026/27: new rates and how to work out your bill
Dividend tax rates rose by two percentage points at the basic and higher rates from April 2026, and the tax-free dividend allowance is only £500.
- Dividend allowance: £500
- Basic rate: 10.75% (up from 8.75%)
- Higher rate: 35.75% (up from 33.75%)
- Additional rate: 39.35% (unchanged)
That affects company directors who pay themselves in dividends, and anyone with shares held outside an ISA or pension.
This guide sets out the 2026/27 rates, a worked example and ways to reduce the tax.
Dividend tax rates
| Band | 2025/26 | 2026/27 |
|---|---|---|
| Basic rate | 8.75% | 10.75% |
| Higher rate | 33.75% | 35.75% |
| Additional rate | 39.35% | 39.35% |
| Dividend allowance | £500 | £500 |
The same rates apply across the UK, including Scotland, because dividend tax isn’t devolved.
How dividends are taxed
Dividends are treated as the top slice of your income. Your personal allowance is used first against salary and other income, then dividends fall into whichever band is left. The £500 allowance taxes the first £500 at 0%, but it still uses up part of your band.
Dividend tax calculator
See your 2026/27 bill.
Kerry, a company director, takes a salary of £12,570 and dividends of £45,000 in 2026/27. Her salary uses her personal allowance. The first £500 of dividends is tax-free. The next £37,200 is taxed at 10.75%, £3,999. The remaining £7,300 is in the higher rate band at 35.75%, £2,610. Her total dividend tax is £6,609, up £890 on 2025/26.
How dividend tax is paid
- Dividends up to £10,000: you can ask HMRC to collect tax through your tax code
- Over £10,000: you need a Self Assessment return
- Directors usually file a return anyway
- Payments on account may apply
Fixed-fee accountancy support
Transparent monthly packages for sole traders, landlords and limited companies. Fixed fees agreed upfront, VAT included.
Get a fixed-fee quoteCall 0161 531 4179Ways to reduce dividend tax
- ISAs: dividends in an ISA are tax-free
- Pensions: employer contributions from your company save Corporation Tax and avoid dividend tax
- Spouse shareholdings: genuine ownership can use both partners’ allowances and bands, but settlement rules apply
- Timing: spreading dividends across tax years to stay in the basic rate band
- Keeping income under £100,000: to protect your personal allowance
Is salary or dividend better now?
With dividend rates higher and employer NI at 15%, the gap has narrowed. For most single-director companies, a salary at the personal allowance plus dividends is still efficient, but sole traders now often keep more. See our salary vs dividends and sole trader vs limited company guides.
HMRC’s guide to tax on dividends explains the basics. Our director tax returns service handles the reporting.
What should I do next?
Including shares outside ISAs.
Run the calculator.
Through the company.
Frequently Asked Questions
What are the dividend tax rates for 2026/27?
10.75% basic, 35.75% higher and 39.35% additional rate.
What is the dividend allowance?
£500 a year.
Do I pay dividend tax on ISA dividends?
No. Dividends in an ISA are tax-free.
Do I need a tax return for dividends?
If you receive more than £10,000, yes. Below that, HMRC can collect through your tax code.
Are dividend rates different in Scotland?
No. Dividend tax rates are the same across the UK.
Need help with this? Wingate Accountants offers fixed-fee online accountancy support across the UK. Call 0161 531 4179 or request a quote at wingateaccountants.co.uk.
About the Author
Stephen Reynold
I’m Stephen Reynold, an accountant at Wingate Accountants. I work with sole traders and small companies, turning tax rules into clear, practical next steps.
