UK Dividend Tax Rates 2026/27 — £500 Allowance & Tax Bands
Introduction
This guide covers UK dividend tax for the 2026/27 tax year: the £500 dividend allowance and the rates that apply to dividend income above it.
Correction notice (updated 30 July 2026). Earlier versions of this page gave the dividend rates as 8.75% / 33.75% / 39.35%. The basic and higher rates each rose by 2 percentage points on 6 April 2026. If you are budgeting a 2026/27 dividend from your own company on the old figures, the bill is higher than you have planned for.
Key Concepts
| Your income tax band | Dividend tax rate above the £500 allowance |
|---|---|
| Basic rate | 10.75% |
| Higher rate | 35.75% |
| Additional rate | 39.35% (unchanged) |
- The dividend allowance is £500, down from £1,000 in 2023/24 and £2,000 before that. It is not an exemption from the band calculation: dividends covered by the allowance still count towards which band the rest of your income falls into.
- Add dividends to your other income to find the band. Dividends are treated as the top slice of income, so they can straddle two bands and be taxed partly at each.
- Dividends inside an ISA or pension are not taxed at all, and do not use the allowance.
Worked example — dividends straddling two bands
A director-shareholder has £45,000 of salary (using up most of their basic-rate band) and receives £10,000 of dividends from their own company in 2026/27. The basic-rate band for 2026/27 runs to £50,270.
- Room left in the basic-rate band before dividends: £50,270 − £45,000 = £5,270
- The first £500 of dividends is covered by the dividend allowance — no tax, but it still occupies part of that £5,270 of remaining basic-rate room.
- Remaining basic-rate room after the allowance: £5,270 − £500 = £4,770, taxed at 10.75%: £4,770 × 10.75% = £512.78
- The rest of the dividends spill into the higher-rate band: £10,000 − £500 − £4,770 = £4,730, taxed at 35.75%: £4,730 × 35.75% = £1,690.98
- Total dividend tax: £512.78 + £1,690.98 = £2,203.76
Exactly £500 of the £10,000 was tax-free, but the other £9,500 was split across two different rates purely because of where the salary had already pushed this person in the band structure — the same £10,000 dividend paid to someone with lower salary elsewhere would be taxed entirely at 10.75%.
FAQ
Q: Does the £500 dividend allowance mean the first £500 of dividends is simply ignored for band purposes? A: No — it's tax-free, but it still counts as part of your income when working out which band the rest of your dividends fall into; it is an allowance against tax, not an exclusion from the band calculation.
Q: Are dividends from shares held in an ISA taxed at all? A: No — dividends inside an ISA (or a pension) are entirely outside this system, don't use the £500 allowance, and never appear on a tax return regardless of how large they are.
Q: Has the additional rate on dividends changed along with the basic and higher rates? A: No — only the basic (8.75%→10.75%) and higher (33.75%→35.75%) rates rose from 6 April 2026; the additional rate stayed at 39.35%.
Sources
Figures verified against HMRC guidance as of 30 July 2026:
- gov.uk / HMRC — Dividend tax rates and allowance (£500 dividend allowance; 10.75%/35.75%/ 39.35% rates from 6 April 2026, up from 8.75%/33.75%/39.35%; top-slice treatment against the basic-rate band; ISA/pension dividends excluded entirely)
- HMRC/professional advisory confirmation of the April 2026 rate rise (Evelyn Partners, Deloitte Taxscape, HWB Accountants — cross-referenced with this site's own freelancer and buy-to-let articles, which independently verify the same rate change)