Dividend Tax Calculator
Calculate UK dividend tax for 2026/27. See how dividends are taxed at basic, higher, and additional rates after the £500 dividend allowance. Includes salary vs dividend comparison.
UK dividend tax for 2026/27 applies after a £500 tax-free allowance: 8.75% in the basic-rate band, 33.75% in the higher-rate band, and 39.35% in the additional-rate band. Dividends take up your personal allowance and are taxed after other income. ISA dividends are always tax-free.
Enter your salary and dividends for the combined tax bill.
Dividend Tax Calculator
Your gross non-dividend income for the tax year.
Total dividends received in the tax year (outside ISAs).
£2,764
Dividend tax
13.8%
Effective rate
£17,236
Net dividends
£500
Tax-free (allowance)
Tax Band Breakdown
Dividends are taxed as the top slice of your income, added after salary and other income. The £500 dividend allowance uses up band space but is taxed at 0%. This calculator covers dividend tax only, your income tax on salary is calculated separately.
2026/27 Dividend Tax Rates
| Tax Band | Income Range | Dividend Rate | vs Income Tax | Saving |
|---|---|---|---|---|
| Allowance | First £500 of dividends | 0% | N/A | N/A |
| Basic rate | £12,571–£50,270 | 8.75% | 20% | 11.25% |
| Higher rate | £50,271–£125,140 | 33.75% | 40% | 6.25% |
| Additional rate | Over £125,140 | 39.35% | 45% | 5.65% |
How UK Dividend Tax Works
Dividends are payments companies make to shareholders from their profits. In the UK, they're taxed at lower rates than salary because the company has already paid corporation tax on those profits. So when your limited company earns £100, it pays 25% corporation tax (£25), leaving £75 to pay as dividends. You then pay dividend tax on those £75, meaning the profit is effectively taxed twice, just at different stages.
The lower dividend tax rates (8.75%, 33.75%, 39.35%) compared to income tax rates (20%, 40%, 45%) partially compensate for this double taxation. But the gap has narrowed significantly, in 2021/22, the basic rate dividend tax was 7.5%. By 2026/27, it's 8.75%. And the dividend allowance has been slashed from £5,000 in 2017/18 to just £500 now.
Crucially, dividends don't attract National Insurance, neither employee NI nor employer NI. For a company director paying themselves, this is the single biggest reason to use dividends. On a £50,000 payment, the NI saving compared to salary is roughly £5,300 (employee NI) plus £6,900 (employer NI) = £12,200. Even after paying dividend tax, there's a meaningful saving.
Salary vs Dividend: The Real Numbers
Here's what you actually take home from £50,000 of company profit, depending on how you extract it. These figures include corporation tax, income tax, NI, and dividend tax.
| Method | Company Profit | Corp Tax | Employer NI | Personal Tax | Take Home |
|---|---|---|---|---|---|
| All salary (basic rate) | £50,000 | £0* | £5,171 | £11,266 | £33,563 |
| Optimal split (£12,570 + divs) | £50,000 | £9,358 | £0 | £2,353 | £38,289 |
| All dividends (no salary) | £50,000 | £12,500 | £0 | £2,625 | £34,875 |
*Salary is a tax-deductible expense for the company, so no corporation tax on that portion. The optimal split uses the personal allowance for salary (no income tax, no employer NI) and takes the rest as dividends (no NI). Figures assume 25% corporation tax and basic rate dividend tax. Individual circumstances vary, consult an accountant.
The Shrinking Dividend Allowance
| Tax Year | Allowance | Basic Rate | Higher Rate | Additional Rate |
|---|---|---|---|---|
| 2017/18 | £5,000 | 7.50% | 32.50% | 38.10% |
| 2018/19 – 2021/22 | £2,000 | 7.50% | 32.50% | 38.10% |
| 2022/23 | £2,000 | 8.75% | 33.75% | 39.35% |
| 2023/24 | £1,000 | 8.75% | 33.75% | 39.35% |
| 2024/25 – 2026/27 | £500 | 8.75% | 33.75% | 39.35% |
The dividend allowance has been cut by 90% since 2017/18. For someone receiving £20,000 in dividends at the higher rate, the extra tax from these changes is about £1,519/year. The direction of travel is clear, dividends are becoming less tax-efficient relative to salary, but still offer meaningful NI savings.
Common Dividend Tax Mistakes
Forgetting dividends stack on top of salary
Your salary fills the basic rate band first. If you earn £45,000 salary, only £5,270 of basic rate band remains for dividends. The rest is taxed at 33.75% higher rate, not 8.75%. Always calculate how much basic rate band you have left before planning dividend amounts.
Not claiming higher rate relief on self-assessment
If your dividends push you into the higher rate band but your tax code only accounts for basic rate, you'll owe extra tax. File your self-assessment on time to avoid interest charges. The deadline is 31 January. HMRC charges 5.5% interest on late payments.
Paying dividends when the company has no profits
Dividends must come from accumulated distributable profits. If your company made a loss this year but has retained profits from previous years, that's fine. If there are no retained profits at all, the dividend is unlawful and may need to be repaid. Check your balance sheet before declaring.
Ignoring the £100K personal allowance trap
If your total income (salary + dividends) exceeds £100,000, your personal allowance is tapered, you lose £1 of allowance for every £2 over £100,000. Between £100,001 and £125,140, your effective marginal tax rate can exceed 60%. Consider pension contributions to bring income below £100,000.
ISAs: The Tax-Free Dividend Strategy
Dividends received inside an ISA are completely tax-free, no dividend tax, no impact on your tax bands, and no reporting required. If you invest in dividend-paying shares or funds, holding them in a Stocks & Shares ISA is almost always the right move.
£20,000
Annual ISA allowance
You can invest up to £20,000/year across all ISA types. This includes Cash ISAs, Stocks & Shares ISAs, and Innovative Finance ISAs. The allowance resets each tax year and can't be carried forward.
£1,750/yr
Tax saving (basic rate)
On £20,000 of dividend-paying investments yielding 4% (£800 dividends), a basic rate taxpayer saves £26/year. But as your ISA grows over years, the savings compound. A £100,000 ISA yielding 4% saves £350/year.
£2,700/yr
Tax saving (higher rate)
Higher rate taxpayers save more, 33.75% vs 8.75%. On £100,000 yielding 4%, that's £1,350/year in saved tax. Over 20 years of compounding, the cumulative saving reaches tens of thousands.
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Sources
- Gov.uk, Tax on dividends 2026/27
- HMRC, Dividend allowance factsheet
- Gov.uk, Income tax rates and personal allowances 2026/27
- HMRC, Self-assessment: reporting dividend income
- Companies House, Distributable profits and lawful dividends
- Gov.uk, Corporation tax rates 2026/27
- HMRC, Tax-advantaged savings (ISAs)
How to use this tool
Enter your non-dividend income (salary, rental, etc.)
Enter total dividend income for the tax year
See your dividend tax bill split by band, effective rate, and net dividends
Common uses
- Company directors planning salary and dividend mix
- Investors calculating tax on share dividends
- Self-assessment preparation for dividend income
- Comparing dividend tax at different income levels
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