Dividend Tax Calculator UK

Dividend tax rates 2026/27

Dividend tax rates are lower than the equivalent income tax rates because the company has already paid corporation tax on the underlying profits. The rates have been unchanged since April 2022, when they rose by 1.25 percentage points. The allowance, by contrast, has been cut sharply: it was £2,000 in 2022/23, £1,000 in 2023/24, and £500 from April 2024 onwards, including 2026/27.

How the calculation works

Dividend tax is not a separate tax — it is income tax charged at special rates on dividend income. The order matters. First, your personal allowance of £12,570 is used by your other income (salary, pension, rent). Dividends are the top slice, so they are stacked on top. Then the first £500 of taxable dividends is charged at 0%. The rest is charged at the dividend rate of the band it falls into.

That stacking is why two people with the same dividends can pay very different tax. £10,000 of dividends with no other income costs nothing at all — the dividends sit inside the personal allowance and the £500 allowance. The same £10,000 on top of a £60,000 salary lands in the higher-rate band and costs 33.75% on most of it. Always enter your other income: a dividend figure on its own tells you almost nothing.

Worked examples

£10,000 of dividends + £30,000 salary. The salary uses the £12,570 personal allowance, leaving £17,430 of taxable salary. The dividends are all taxable: £500 at 0%, and the remaining £9,500 sits in the basic-rate band (there is £19,770 of basic-rate room left), so 8.75% × £9,500 = £831.25.

£60,000 of dividends + £40,000 salary. Taxable salary is £27,430. Of the dividends: £500 at 0%, £9,770 in the basic band at 8.75% (£854.88), and the remaining £49,730 in the higher band at 33.75% (£16,783.88). Total dividend tax: £17,638.75. The effective rate on the dividends is about 29.4%.

£20,000 of dividends, no other income. The personal allowance covers the first £12,570, the £500 dividend allowance covers the next £500, and the remaining £6,930 is in the basic band at 8.75% = £606.38. This is the classic limited-company director position: a small salary plus dividends, with the allowances doing the heavy lifting.

Do you need to report dividends?

If you receive more than £10,000 of dividend income in a tax year, you need to file a Self Assessment tax return. Below that, HMRC can usually collect the tax through your tax code if you tell them, or you can declare it on a return. Dividends from shares held inside an ISA or a SIPP are completely free of UK dividend tax and do not need to be declared. Foreign dividends have their own rules, including foreign tax credits — this calculator covers UK dividends only. The Self Assessment deadline for the 2026/27 tax year is 31 January 2028 if you file online.

Company directors should note the interaction with corporation tax: the company pays corporation tax on its profits before it can pay you a dividend, so the dividend tax here is the second layer of tax on the same money. That is exactly why the dividend rates are lower than the salary rates — and why the comparison between salary and dividends is not as simple as 8.75% versus 20%. Our IR35 calculator runs the full comparison for contractors.

Salary or dividends: the director’s choice

If you run your own limited company, you usually take a mix: a salary and dividends. The salary is an expense of the company, so it reduces the company’s taxable profit, and it counts towards your National Insurance record — you need qualifying years for the State Pension, and a salary at or above the Lower Earnings Limit builds them. The usual director’s salary is set at the personal allowance of £12,570, so no income tax is due on it, and it sits below the point where employee National Insurance starts. But a salary above the £5,000 secondary threshold does attract employer National Insurance at 15%, paid by the company, which is why many directors keep the salary at or below that threshold and take the rest as dividends — although the exact best split depends on the company’s profit, the Employment Allowance and whether there are other employees, so it is worth modelling rather than copying a headline figure.

Dividends, by contrast, are paid out of after-tax profit and carry no National Insurance at all. That is the whole attraction: on a £10,000 slice of profit, taking it as salary above the thresholds can cost 20% income tax plus 8% employee NI plus 15% employer NI, while taking it as a dividend costs 19% corporation tax and then 8.75% dividend tax on what is left — a much lower combined rate. The gap narrows as income rises: dividends in the higher-rate band are taxed at 33.75%, and in the additional-rate band at 39.35%, while the corporation tax layer is still there underneath. At very high incomes the dividend route can even cost more than salary, which is why the calculator above lets you move the numbers and see the answer change.

One more thing to watch: dividends push your total income up, and total income drives other things. A large dividend can push you over the £100,000 point where the personal allowance starts to shrink, over the £60,000 point where the High Income Child Benefit Charge starts, or over the £50,270 point where your Personal Savings Allowance falls from £1,000 to £500. If you are near one of those edges, the timing of a dividend — this tax year or next — can be worth more than the rate itself. And remember that dividends are not earned income for pension purposes: they do not increase the amount you can pay into a pension with tax relief, which is based on your relevant UK earnings. Salary does.

Related: Corporation Tax Calculator · IR35 Calculator · Income Tax Calculator 2026/27

Sources: HMRC “Tax on dividends” (allowance £500; rates 8.75%/33.75%/39.35%; Self Assessment above £10,000); GOV.UK “Income Tax rates and Personal Allowances” (personal allowance £12,570; bands to £50,270 and £125,140). Checked 13 November 2026.