Dividend Allowance Calculator 2026/27

Worked examples: what the £500 allowance covers

These examples use a £30,000 salary, so the Personal Allowance is already used up and the dividends start straight at the dividend allowance.

2026/27 rates. With a £30,000 salary the Personal Allowance is already used, so the tax-free column here is the £500 dividend allowance on its own.

Up to £500 there is nothing to pay. Above it, every £1 of dividends costs 10.75p for a basic-rate taxpayer, 35.75p at the higher rate and 39.35p at the additional rate.

How the dividend allowance has shrunk

*For a basic-rate taxpayer whose Personal Allowance is used by salary: dividends above the allowance taxed at that year's basic dividend rate (7.5%, 8.75% or 10.75%). Source: GOV.UK, Tax on dividends.

How the £500 allowance is applied

The dividend allowance is not a deduction from your dividends. In the legislation it is a 0% rate on the first £500 of dividends that would otherwise be taxed (the "dividend nil rate"). That difference matters, because dividends taxed at 0% still count as income and still fill up your tax bands. The calculator applies it in that order: your salary or pension uses the Personal Allowance first, any Personal Allowance left over covers dividends next, then the £500 is taxed at 0%, and only what remains is taxed at 10.75%, 35.75% or 39.35%.

There is one allowance per person per tax year, shared across every source: UK company dividends, fund distributions, foreign dividends and dividends from your own company. It does not reset for each company or each broker account, and anything you do not use by 5 April is lost. Dividends inside an ISA or a pension do not use it at all.

Whether you need to tell HMRC follows from the same figures. GOV.UK says you do not need to tell HMRC about dividends within the allowance. Between the allowance and £10,000 you can ask HMRC to collect the tax through your tax code, or include it on your tax return if you already send one. Above £10,000 of dividends you must use Self Assessment.

Three cases the simple rule gets wrong

2026/27. Someone whose only income is dividends, for example a retired shareholder with no pension yet.

The allowance can push dividends into the higher rate

Salary £50,000 and dividends £1,000. The salary leaves £270 of the basic-rate band, so you might expect the first £500 to be free and the rest taxed at 10.75%. But the £500 at 0% uses that £270 of band space first. The remaining £500 sits wholly in the higher-rate band, so the tax is £178.75, all at 35.75%.

Each person has their own allowance

One partner on a £30,000 salary receives £1,000 of dividends and pays £53.75. If the shares were owned half each by two people on similar salaries, each would receive £500 and pay £0, because each has a separate allowance. Dividends are taxed on whoever owns the shares, so this depends on real ownership, not on whose account the money lands in.

With no other income, the first £13,070 is tax-free

If dividends are your only income, the £12,570 Personal Allowance covers them first and the £500 allowance then takes you to £13,070 with £0 to pay. At £20,000 the tax is £744.98: £6,930 taxed at 10.75%.

Every figure here is worked out by the same code as the calculator, using 2026/27 rates unless another year is named. Estimates for planning, not tax advice.

Mistakes to avoid

• Thinking dividends within the allowance are not income. They still count towards adjusted net income, which is the figure used for the Personal Allowance taper above £100,000 and the High Income Child Benefit Charge, which starts at £60,000.
• Counting one allowance per company or per account. A £400 dividend from one company and £400 from another use £800 of a single £500 allowance.
• Forgetting reinvested dividends. Dividends from accumulation units in a fund are reinvested for you, but they are still taxable income and still use the allowance.
• Using an old allowance. It was £2,000 in 2022/23 and £1,000 in 2023/24, and has been £500 since 6 April 2024.