What is dividend yield and how is it calculated?

Dividend yield = (annual dividend per share ÷ current share price) × 100. For example, if a share price is £10 and the annual dividend is £0.50, the yield is 5%. Yield changes as the share price moves even if the dividend stays constant. A higher yield can indicate either a generous payout or a falling share price, always consider both.

How much can I earn in dividends before paying tax?

For 2026/27, the dividend allowance is £500, the first £500 of dividend income each year is tax-free. If your total income (salary plus dividends) is below the personal allowance of £12,570, those dividends may also be covered by the personal allowance. Above £500, dividends are taxed at 10.75% (basic), 33.75% (higher), or 39.35% (additional rate).

How are dividends paid in the UK?

UK company dividends are typically paid directly into shareholders' bank accounts. Listed companies announce a payment date and an ex-dividend date, you must hold shares before the ex-dividend date to qualify for that payment. Private company dividends are declared by the directors and paid to shareholders in proportion to their shareholding, provided distributable profits exist.

What is the difference between dividend tax and income tax?

Income tax applies to earnings such as salary, pension, and rental income at rates of 20%, 40%, or 45%. Dividend tax applies specifically to dividend income at lower rates: 10.75%, 33.75%, or 39.35% for 2026/27. Both use the same income bands but different rates, which is why taking income as dividends from a limited company can be more tax-efficient than salary.

Updated 6 April 2026

Dividend Calculator · Free UK 2026/27

Calculate dividend income from your shareholding: yield, gross income, and net after the £500 allowance. Updated 2026/27.

✓ Free to use✓ £500 allowance✓ Yield calculator✓ Updated 2026/27

Dividend Calculator

Enter share price, quantity and yield. Annual income appears instantly

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Gross income before tax. You may owe dividend tax if income exceeds the £500 allowance, use our Dividend Tax Calculator to calculate your tax liability.

How to Calculate Dividend Income

Quick Answer: Dividend income = number of shares × dividend per share. Dividend yield = annual dividend per share ÷ share price × 100. For 2026/27, the first £500 of dividends is tax-free. Above that, basic rate taxpayers pay 10.75%, higher rate pay 33.75%.

Dividend Yield vs Dividend Income

Dividend yield tells you the return as a percentage of the share price, useful for comparing stocks. Dividend income is the actual cash you receive. Both are important: a 5% yield on a £10,000 holding generates £500 per year. But if the share price falls 20%, you have a capital loss that dwarfs the dividend gain. Always consider total return (dividends + capital appreciation/depreciation).

Formula

Annual Dividend = Shares × Share Price × (Yield % ÷ 100) | Yield = (Annual Div per Share ÷ Price) × 100

1,000 shares at £10, 4% yield: 1,000 × £10 × 4% = £400/year gross

Worked Example: 500 shares, basic rate taxpayer

Shares owned500

Share price£20.00

Dividend yield4%

Gross annual dividend£400.00

Less dividend allowance (£500)£0 tax due

Net dividend income£400.00

Below £500 dividends, no dividend tax is due regardless of your tax band.

Frequently Asked Questions

Dividend income = number of shares × dividend per share. If a company pays 30p per share and you own 1,000 shares, your annual dividend is £300. Most companies pay dividends quarterly or twice-yearly. Your total annual dividend is the sum of all payments across the year. Check the company's dividend history or investor relations page for current payment levels.