Dividend Tax Calculator

In the UK, dividends are taxed separately from other income but the rate you pay depends on your overall income tax band. Every individual receives a tax-free dividend allowance, which stands at £500.00 for the 2025/26 tax year. This means the first £500.00 of dividends you receive is completely free of tax, regardless of your income level.

Once your dividend allowance has been used, the remaining dividends are taxed at special dividend tax rates that are lower than standard income tax rates. Basic rate taxpayers pay 8.75% on dividends, higher rate taxpayers pay 33.75%, and additional rate taxpayers pay 39.35%. Critically, dividends sit on top of your other income when determining which band applies, so your salary and other earnings consume the basic rate band first.

The dividend allowance has been reduced significantly in recent years. It was £2,000.00 in 2022/23, dropped to £1,000.00 in 2023/24, and fell again to £500.00 from April 2024 onwards. This reduction means more of your dividend income is now subject to tax than in previous years. Investors should consider using a Stocks and Shares ISA to shelter dividend income entirely from tax, as dividends earned within an ISA wrapper are tax-free regardless of the amount.

Looking ahead to April 2026 and the 2026/27 tax year, the government has confirmed that dividend tax rates and the £500.00 allowance will remain frozen. With income tax thresholds also frozen until 2028, fiscal drag means more taxpayers will find their dividends pushed into higher rate bands over time. Planning your dividend income carefully, making full use of ISA allowances, and considering pension contributions can all help reduce your overall dividend tax bill.