What is the dividend allowance for 2026/27?

The dividend allowance for 2026/27 is £500. This means the first £500 of dividends you receive each tax year is free from dividend tax, regardless of your income tax band. Dividends above £500 are taxed at 10.75% (basic), 33.75% (higher), or 39.35% (additional rate), depending on your total income. The allowance does not reduce your income for band purposes.

How much dividend can I take tax-free in 2026/27?

You can receive up to £500 in dividends tax-free in 2026/27, thanks to the dividend allowance. Additionally, if your total income (including dividends) is below the personal allowance of £12,570, those dividends are also tax-free. A director-shareholder with no other income could receive up to £13,070 tax-free (£12,570 personal allowance + £500 dividend allowance).

What is the most tax-efficient salary and dividend combination?

For 2026/27, the most tax-efficient combination for a sole director-shareholder is typically a salary of £12,570 (personal allowance) or £5,000 (employer NI secondary threshold) paired with dividends up to the basic rate band. Taking a £12,570 salary with dividends up to £50,270 total income minimises corporation tax while avoiding higher rate dividend tax. Verify with your accountant.

Do I pay National Insurance on dividends?

No. National Insurance (NI) is not payable on dividend income. This is one of the main tax advantages of taking income as dividends from your own limited company rather than as salary. Only earned income (salary, wages, self-employment profits) attracts NI. Dividends are subject only to income tax at dividend rates, after the £500 allowance.

When do I need to pay dividend tax?

Dividend tax is paid through self-assessment. You must register for self-assessment, complete a tax return, and pay any dividend tax due by 31 January following the end of the tax year. For dividends received in the 2026/27 tax year (ending 5 April 2027), payment is due by 31 January 2028. If you already complete a self-assessment return, your dividend income is reported there.

Updated 6 April 2026

Dividend Tax Calculator · Free UK 2026/27

Calculate dividend tax after the £500 allowance. Shows basic, higher, and additional rate tax on your dividends. Updated for 2026/27.

✓ Free to use✓ £500 allowance✓ All tax bands✓ Updated 2026/27

Dividend Tax Calculator

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2026/27 rates. Declare via self-assessment by 31 January following the tax year end.

How Dividend Tax is Calculated

Quick Answer: For 2026/27, the first £500 of dividends is tax-free (dividend allowance). Above that, the tax rate depends on your income band: 10.75% (basic), 33.75% (higher), or 39.35% (additional). No National Insurance is paid on dividends. Dividend tax is declared through self-assessment.

Dividend Tax Rates 2026/27

Dividends are taxed after all other income. The rate that applies depends on which income tax band the dividend income falls into when added on top of your other income (salary, rental income, etc.). The personal allowance (£12,570) and basic rate band (up to £50,270 total income) apply in the usual way.

Formula

Dividend Tax = (Dividends − £500 allowance) × Dividend Tax Rate (based on income band)

£5,000 dividends (basic rate taxpayer): (£5,000 − £500) × 10.75% = £483.75

Worked Example, £10,000 dividends, basic rate taxpayer

Total dividends received£10,000

Less dividend allowance£500

Taxable dividends£9,500

Tax rate (basic rate band)10.75%

Dividend tax due£1,021.25

Effective rate on total10.21%

If dividends push you into the higher rate band, a portion will be taxed at 33.75%.

Dividend Allowance vs Personal Allowance

The dividend allowance (£500) is separate from the personal allowance (£12,570). If your only income is dividends and it is below £12,570, the personal allowance covers it first, making the dividend allowance redundant in those cases. The £500 allowance matters most for higher earners who have already used their personal allowance against salary.

Frequently Asked Questions

For 2026/27, dividend tax rates are: 10.75% for basic rate taxpayers, 33.75% for higher rate taxpayers, and 39.35% for additional rate taxpayers. The first £500 of dividends each year is covered by the dividend allowance and is tax-free. The rate that applies depends on which income tax band your total income (salary plus dividends) falls into.