Additional-Rate Dividend Tax 2026/27
For 2026/27, dividends in the additional-rate band are taxed at 39.35%. This applies when your total income exceeds £125,140. After the £500 dividend allowance, the rate of 39.35% applies to all dividends in this band.
Published by the UK Money Calculators editorial team. Last updated for the 2026/27 tax year.
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Between £100,000 and £125,140 your Personal Allowance is being withdrawn.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
Scenario: Total income (salary + other) exceeds £125,140. Additional £10,000 of dividend income in 2026/27.
- Total income already above £125,140 — all dividends fall in the additional-rate band.
- First £500 of dividends: covered by the dividend allowance — £0 tax.
- Remaining taxable dividends: £10,000 − £500 = £9,500.
- Dividend tax: £9,500 × 39.35% = £3,738.25.
- Total dividend tax: £3,738.25.
Compare this with the basic-rate scenario: £9,500 × 10.75% = £1,021.25. The additional-rate taxpayer pays £2,717 more on the same dividend amount.
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 allowance and is free from tax at all rates.
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.