How much tax do I pay on dividends in the UK for 2025-26?

For 2025-26, the first £500 of dividends are tax-free (dividend allowance). Above that: basic-rate taxpayers pay 8.75%, higher-rate taxpayers pay 33.75%, and additional-rate taxpayers pay 39.35%. Dividends stack on top of other income when determining which band applies.

What is the dividend allowance for 2025-26?

The dividend allowance for 2025-26 is £500. The first £500 of dividend income is tax-free regardless of your other income. Dividends above this are taxed based on which income tax band they fall into after stacking on top of your salary.

Should I take salary or dividends as a company director?

Most directors take a combination: a salary up to the NI threshold (around £12,570) to maintain qualifying NI years, with additional income as dividends to reduce overall tax. The optimal split depends on total income, corporation tax, and personal circumstances.

Dividend Tax Calculator

Calculate UK dividend tax for 2025-26. See how your dividends are taxed alongside salary income, with a full band breakdown. Includes the £500 dividend allowance, basic, higher and additional rate calculations, and personal allowance taper.

Your Income

Annual salary / other income

Annual dividend income

Tax year

Apply personal allowance (£12,570)

Total income£50,000

Dividend allowance£500

Dividend tax

£1,706

Effective rate: 8.5%

Total take-home

£43,413

£3,618/month

Dividend Tax Breakdown

Band	Rate	Taxable	Tax
Dividend Allowance	0%	£500	£0
Basic Rate	8.75%	£19,500	£1,706
Total dividend tax	8.5%		£1,706

Full Income Summary

Salary / other income£30,000

Dividend income£20,000

Income tax (on salary)-£3,486

National Insurance-£1,394

Dividend tax-£1,706

Total tax£6,587

Effective total rate13.2%

Net annual income£43,413

Net monthly£3,618

Marginal dividend rate

8.75%

Rate on your next £1 of dividends

Personal allowance

£12,570

Taxable dividends

£19,500

After £500 allowance

Smart Tips

You may need to file a Self Assessment tax return

If your dividend income exceeds the £500 allowance, you'll usually need to tell HMRC. If your total untaxed income exceeds £10,000, you must register for Self Assessment.

GOV.UK: Self Assessment tax returns

Dividend tax rates are lower than income tax rates

Dividends are taxed at 8.75% (basic), 33.75% (higher), and 39.35% (additional) — lower than the equivalent income tax rates of 20%, 40%, and 45%. This is because company profits have already been subject to corporation tax before being distributed as dividends.

GOV.UK: Tax on dividends

Dividends in an ISA are completely tax-free

Shares held within a Stocks & Shares ISA generate tax-free dividends. You can invest up to £20,000 per year into ISAs. Moving investments into an ISA could save you dividend tax in future years.

GOV.UK: Individual Savings Accounts (ISAs)

Frequently asked questions

How much tax do I pay on dividends in the UK for 2025-26?: For 2025-26, the first £500 of dividends are tax-free (dividend allowance). Above that: basic-rate taxpayers pay 8.75%, higher-rate taxpayers pay 33.75%, and additional-rate taxpayers pay 39.35%. Dividends stack on top of other income when determining which band applies.
What is the dividend allowance for 2025-26?: The dividend allowance for 2025-26 is £500. The first £500 of dividend income is tax-free regardless of your other income. Dividends above this are taxed based on which income tax band they fall into after stacking on top of your salary.
Should I take salary or dividends as a company director?: Most directors take a combination: a salary up to the NI threshold (around £12,570) to maintain qualifying NI years, with additional income as dividends to reduce overall tax. The optimal split depends on total income, corporation tax, and personal circumstances.