Dividend Tax Calculator
Calculate UK tax on dividend income for 2026/27
Dividend allowance: £500 for 2026/27
Total dividends from shares, funds, etc.
Salary, pension, rental income, etc.
Tax-free (not included in calculation)
Taxable Dividends
£9,500.00
Basic Rate Tax
£1,021.25
Higher Rate Tax
£0.00
Total Tax Due
£1,021.25
Tax Breakdown
Dividend Allocation
- Tax-Free (Allowance)
- Basic Rate (10.75%)
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Important Notes
- Dividend allowance reduced from £2,000 to £500 (April 2024)
- ISA dividends are completely tax-free
- Report dividends over £500 on Self Assessment tax return
- UK dividend tax rates differ from income tax rates
How dividend tax actually works
Dividend income is taxed separately from your salary, but the two are combined to determine which tax band your dividends fall into. Dividends are treated as the "top slice" of your income, so your salary and other earnings use up your Personal Allowance and basic-rate band first, and only the dividend income above that is taxed at dividend rates.
This calculator applies the current dividend allowance (£500 for 2026/27) before working out how much of your remaining dividend income falls into the basic, higher, and additional dividend tax bands.
Key facts about UK dividend tax
The allowance has shrunk sharply
The tax-free dividend allowance was £2,000 as recently as 2022/23. It has been cut to £1,000, then £500 since, meaning far more investors with modest share portfolios now owe dividend tax.
Dividend tax rates are lower than income tax rates
At 10.75% (basic), 35.75% (higher) and 39.35% (additional), dividend tax rates sit below equivalent Income Tax bands (20%/40%/45%), one reason company directors often pay themselves via dividends alongside a small salary.
ISA dividends are completely shielded
Any dividends earned inside a Stocks & Shares ISA are entirely tax-free and don't use up your dividend allowance, a major reason to prioritise ISA contributions before holding shares outside one.
Dividends stack on top of other income
Your dividend tax band is determined by your total income (salary + dividends combined), not dividends in isolation, a high salary can push your dividends into a higher tax bracket.
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Worked example: £5,000 of dividends
With a £500 dividend allowance, £4,500 of £5,000 in dividends is taxable. If all of it falls in the basic-rate band (10.75%), the tax is £483.75. Higher-rate taxpayers pay 35.75% on the same slice, which would be £1608.75.
Frequently Asked Questions
Do dividends in an ISA or pension count?
No. Dividends received inside an ISA or a pension are free of dividend tax.
Are dividends taxed as the top slice of income?
Yes. Dividends are treated as the top slice of your income, so your salary uses up your allowance and bands first.
How do I pay tax on dividends?
If you are over the allowance, you usually report them through Self Assessment, or HMRC may adjust your tax code for smaller amounts.
Frequently Asked Questions
What is the dividend allowance for 2026/27?
The dividend allowance is £500 for 2026/27. Dividends within this allowance are tax-free.
What are the dividend tax rates?
Basic rate: 10.75%, Higher rate: 35.75%, Additional rate: 39.35% (2026/27 tax year).
Do I need to report dividend income?
Yes, if your total dividend income exceeds £500, you must report it on a Self Assessment tax return.
Are dividends from ISAs taxable?
No, dividends from stocks and shares ISAs are completely tax-free and do not count towards your dividend allowance.
Key Terms Explained
Plain-English definitions of the financial terms used in this calculator.
- Gross vs Net Income
- Gross income is your pay before deductions; net (take-home) pay is what lands in your bank after income tax, National Insurance, pension contributions and student loan repayments.
- Personal Allowance
- The amount of income you can earn each tax year before paying income tax, £12,570 for most people in the UK. It is reduced by £1 for every £2 earned above £100,000.
- National Insurance (NI)
- A UK payroll contribution that funds the State Pension and some benefits. Employees pay Class 1 NI on earnings above the primary threshold, deducted automatically through PAYE.
- Tax Band
- The income ranges taxed at different rates. In England, Wales and NI: basic rate 20%, higher rate 40% (above £50,270) and additional rate 45% (above £125,140). Scotland uses its own bands.
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Not Financial Advice: This calculator is for informational and educational purposes only. Results are estimates and do not constitute financial advice, recommendations, or regulated advice. We are not authorised or regulated by the Financial Conduct Authority (FCA). Always consult a qualified financial adviser for personalised advice. Tax treatment depends on your individual circumstances and may change. Tax laws and rates may change. Past performance does not guarantee future results.
