Guide

Additional-Rate Dividend Tax 2026/27

Written by James Whitfield · Updated August 2026 · Checked against 2026/27 HMRC rates

Dividends in the additional-rate band are taxed at 39.35%1 for 2026/27 — that band starts once total income clears £125,1402. On the same £9,500 of dividends, an additional-rate taxpayer pays about £2,717 more than a basic-rate one. Here's exactly how it lands, and the levers that actually move the number.

Key takeaways
  • The additional-rate dividend rate is 39.35%1 on everything above the £500 allowance.
  • The trigger is £125,1402 of total income — not £150,000, which stopped applying in April 2023.
  • At this level the Personal Allowance is already fully tapered to £02.
  • The £500 dividend allowance1 never tapers — even the highest earners keep it.
  • ISAs, pension contributions and spouse transfers are the three realistic ways to cut the bill3.

The 39.35% additional-rate dividend tax

The additional-rate dividend tax rate is 39.35% for 2026/27. You pay this on dividend income above £125,140. If your total income — salary, dividends, savings interest and anything else — exceeds £125,140, dividends above that level are taxed at 39.35%.

The threshold dropped from £150,000 to £125,140 in April 2023. If your income is between £125,140 and £150,000, you are already an additional-rate taxpayer. Using £150,000 as the threshold will cause you to underestimate your dividend tax.

Who pays the additional rate?

You hit the additional rate when total income exceeds £125,140. At that point the Personal Allowance has been fully tapered to zero — the taper starts at £100,000 and removes £1 of allowance for every £2 above that.

Additional-rate taxpayers pay 45% on non-savings income, 45% on savings income, and 39.35% on dividends above the £500 allowance. Directors taking salary plus dividends from their own company often reach the additional rate when dividends push total income above £125,140.

The £500 dividend allowance at the additional rate

Every UK taxpayer gets a £500 dividend allowance regardless of tax band. Additional-rate taxpayers still get the first £500 of dividends completely free. Only dividends above £500 are taxed at 39.35%. The allowance doesn't taper — it stays at £500 for all taxpayers, including those well above the additional-rate threshold.

The £100,000–£125,140 taper zone

Between £100,000 and £125,140 your Personal Allowance is being withdrawn. For every £2 above £100,000 you lose £1 of allowance. That creates an effective marginal rate on non-savings income of 60% in that band.

Dividends in this range are taxed at 35.75%, not 39.35%. You only hit the additional rate once income passes £125,140. But the Personal Allowance taper makes this zone tricky to plan around. Pension contributions can reduce your adjusted net income and restore some or all of the allowance.

Worked example — income above £125,140

Total income (salary plus other) already above £125,140, then a further £10,000 of dividends in 2026/27. Every one of those dividend pounds lands in the additional-rate band.

Dividends (all in the additional-rate band)£10,000
Dividend allowance (0%)£500
Taxable dividends (£10,000 − £500)£9,500
£9,500 taxed at 39.35%£3,738.25
Total dividend tax£3,738.25

The same £9,500 would cost a basic-rate taxpayer just £1,021.25 (at 10.75%). The additional rate is £2,717 more on identical dividends — which is exactly why the ISA and pension routes below matter so much at this income level.

2026/27 dividend tax rates at a glance

Band Total income Dividend rate
Basic rate Up to £50,270 10.75%
Higher rate £50,271 – £125,140 35.75%
Additional rate Above £125,140 39.35%

The first £500 of dividend income is covered by the dividend allowance1 and is taxed at 0% — though it still occupies part of whichever band it sits in.

Planning considerations for additional-rate taxpayers

At 39.35%, the tax on dividends is high. A few strategies are worth considering:

  • ISA contributions — dividends inside a Stocks and Shares ISA are completely exempt from income tax. The annual ISA allowance is £20,000.
  • Pension contributions — reducing adjusted net income below £125,140 can drop dividends into the higher-rate band (35.75%) and also restore some Personal Allowance if income is below £125,140.
  • Spouse or civil partner allowances — transferring dividend-producing assets to a lower-income partner can move dividends into a lower rate band.

Calculate your dividend tax

Enter your salary and dividend income to see a full breakdown at 10.75%, 35.75% and 39.35% for 2026/27.

Use the calculator

Sources & references

Every headline figure in this guide is drawn from the official HMRC and GOV.UK sources below and reflects the confirmed 2026/27 rates. Each link opens the relevant official page in a new tab.

  1. Tax on dividends ↗ https://www.gov.uk/tax-on-dividends
  2. Income Tax rates and Personal Allowances ↗ https://www.gov.uk/income-tax-rates
  3. Self Assessment tax returns ↗ https://www.gov.uk/self-assessment-tax-returns
Verified against published UK government guidance.

Frequently asked questions

What is the additional-rate dividend tax rate for 2026/27?
The additional-rate dividend tax rate is 39.35% for 2026/27. It applies to dividend income above the additional-rate threshold of £125,140. The first £500 of dividends is still covered by the dividend allowance and is tax-free for all taxpayers.
At what income level does 39.35% dividend tax apply?
The 39.35% rate applies when total income — salary, dividends, savings and other income combined — exceeds £125,140. This threshold has applied since April 2023, reduced from the previous £150,000 threshold.
Does the £500 dividend allowance apply at the additional rate?
Yes. The £500 dividend allowance applies to every UK taxpayer regardless of rate band. Additional-rate taxpayers also benefit from the first £500 of dividends being completely tax-free. Only dividends above £500 are taxed at 39.35%.
Do additional-rate taxpayers still have to file Self Assessment?
Almost certainly. Anyone with income above £150,000 has historically been asked to file, and if your dividends exceed £10,000 you must register for Self Assessment regardless of your band. With income above £125,140 you will typically already be inside the system. The deadline for the 2026/27 return is 31 January 2028 for online filing.
Is it worth moving dividends into an ISA at the additional rate?
For most additional-rate investors, yes — it's the single biggest saving available. Dividends inside a Stocks and Shares ISA are completely free of the 39.35% charge, with no cap on the tax-free dividends the wrapper can shelter. The constraint is the £20,000 annual ISA subscription limit, so building a meaningful ISA holding takes a few years of full contributions.

Disclaimer: This guide is for general information only and does not constitute financial or tax advice. Tax rules can change and individual circumstances vary. Consult a qualified accountant or tax adviser for advice specific to your situation.

Written and reviewed by James Whitfield and the editorial team.

Every figure is checked against current HMRC and GOV.UK guidance and reviewed for the 2026/27 tax year. We explain the numbers in plain English with worked examples. Editorial standards · About us