Additional-rate taxpayers pay 39.35% on dividends above the £500 allowance. This guide covers who qualifies as an additional-rate taxpayer, the key threshold, and a worked example for 2026/27.
Published by the UK Money Calculators editorial team. Last updated for the 2026/27 tax year.
You become an additional-rate taxpayer when your total income exceeds £125,140 in a tax year. This threshold has applied since April 2023, when it was reduced from the previous level of £150,000. Above £125,140, you pay 39.35% on dividend income (above the £500 allowance), 45% on non-savings income, and 45% on savings income.
At this level of income, the Personal Allowance has also been fully tapered away. The taper begins at £100,000, with £1 of Personal Allowance lost for every £2 of income above that level. At £125,140 the Personal Allowance reaches £0. There is no Personal Allowance available to shelter any income.
A common mistake is to use £150,000 as the additional-rate threshold. This was the threshold before April 2023. Since then, it has been £125,140. If you have income between £125,140 and £150,000, you are already an additional-rate taxpayer and pay 39.35% on dividends.
The £100,000–£125,140 band is also worth noting. In that range, your Personal Allowance is being gradually withdrawn, creating an effective marginal income tax rate of 60% on non-savings income in that band. Dividends in that range are taxed at 33.75% (the higher-rate dividend rate), but the loss of Personal Allowance on salary income makes careful income planning particularly important.
Even at the additional rate, the first £500 of dividend income each tax year is covered by the dividend allowance and is completely free from dividend tax. This applies to every UK taxpayer. Dividends above £500 are then taxed at 39.35%.
Scenario: Total income £140,000, dividends £20,000 (included within the £140,000 total) in 2026/27.
Non-dividend income tax (on salary, pension etc.) is separate from this calculation.
For limited company directors with income above £125,140, taking salary up to the Personal Allowance level is no longer possible (the PA is zero). The optimal salary/dividend split at this level depends on individual circumstances and should be modelled carefully, ideally with a qualified accountant.
Key considerations include: corporation tax on company profits (19% or 25%), employer and employee NIC on salary, and the 39.35% personal dividend tax rate. At this level there are also significant pension contribution opportunities that can reduce the adjusted net income below £125,140 and restore some or all of the Personal Allowance.
| Band | Total income | Dividend rate |
|---|---|---|
| Basic rate | Up to £50,270 | 8.75% |
| Higher rate | £50,271 – £125,140 | 33.75% |
| Additional rate | Above £125,140 | 39.35% |
The first £500 of dividends each year is free from tax at all rates. No Personal Allowance applies above £125,140.
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Use the calculatorDisclaimer: 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.