Dividend Tax for Additional-Rate Taxpayers 2026/27
Above £125,140 of total income you're an additional-rate taxpayer, and dividends over the £500 allowance are taxed at 39.35%1 — the top rate. The threshold trips a lot of people up: it's been £125,140, not £150,000, since April 2023. Here's who's caught, the pension move that can pull you back, and a worked example.
- Additional-rate dividends are taxed at 39.35%1 for 2026/27 — the highest dividend rate.
- The threshold is £125,1402, down from £150,000 in April 2023 — using the old figure is a common and costly mistake.
- Above £125,140 the Personal Allowance is already £02 — it tapers from £100,000 and runs out at £125,140.
- You still get the £500 dividend allowance1; everything above it is charged at 39.35%.
- A pension contribution that drops adjusted net income below £125,140 can claw back Personal Allowance3 and cut the overall bill.
Who is an additional-rate taxpayer?
You become an additional-rate taxpayer when total income exceeds £125,140. That threshold has applied since April 2023, when it was cut from £150,000. Above £125,140 you pay 39.35% on dividends (above the £500 allowance), 45% on non-savings income, and 45% on savings income (49% from 6 April 2027, Budget 2026).
At this level, the Personal Allowance has also been fully tapered to zero. The taper begins at £100,000 and removes £1 of allowance for every £2 above that. At £125,140 it reaches £0. No Personal Allowance is left to shelter anything.
The £125,140 threshold — not £150,000
A common error is using £150,000 as the threshold. That was the figure before April 2023. Since then it has been £125,140. If your income is between those two numbers, you are an additional-rate taxpayer right now.
The £100,000–£125,140 band is also worth watching. Your Personal Allowance is being withdrawn in that range, creating an effective marginal rate of 60% on non-savings income. Dividends there are taxed at 35.75%, but the disappearing Personal Allowance on salary makes income planning in that zone very important.
The £500 dividend allowance still applies
Even at the additional rate, the first £500 of dividends each year is covered by the allowance and is free. That applies to every UK taxpayer. Everything above £500 is taxed at 39.35%.
Worked example
Total income £140,000, of which £20,000 is dividends, in 2026/27. Income over £125,140 means the Personal Allowance is tapered to £0, so all £120,000 of salary is taxable. That fills the basic band and £82,300 of the higher band, leaving £5,140 of higher band before the additional rate starts at £125,140 of taxable income. The dividends sit on top of the salary: the £500 allowance uses the first £500 of that space, the next £4,640 is taxed at the higher rate and the rest at the additional rate.
| Total income | £140,000 |
| Personal Allowance (tapered to zero above £125,140) | £0 |
| Taxable salary | £120,000 |
| Dividends | £20,000 |
| Dividend allowance (0%, uses higher-rate band) | £500 |
| £4,640 taxed at 35.75% (up to £125,140) | £1,658.80 |
| £14,860 taxed at 39.35% (above £125,140) | £5,847.41 |
| Total dividend tax | £7,506.21 |
Income tax on the £120,000 salary is separate from this and paid on top. This figure is the personal dividend tax only.
Limited company directors at this income level
For directors with income above £125,140, taking salary up to the Personal Allowance level no longer works — the PA is zero. The right salary/dividend split at this level depends on your specific numbers and needs careful modelling.
You need to weigh corporation tax (19% or 25%), employer and employee NIC on salary, and the 39.35% personal dividend rate. Pension contributions are worth looking at here — contributing enough to bring adjusted net income below £125,140 can restore some or all of the Personal Allowance and reduce the overall bill.
2026/27 dividend tax rates
| 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 dividends each year is covered by the dividend allowance1 and taxed at 0%. No Personal Allowance applies above £125,1402.
Calculate your dividend tax
Enter your salary and dividend income to get a breakdown including the 39.35% additional rate.
Use the calculatorSources & 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.
- Tax on dividends ↗ https://www.gov.uk/tax-on-dividends
- Income Tax rates and Personal Allowances ↗ https://www.gov.uk/income-tax-rates
- Tax on your private pension contributions ↗ https://www.gov.uk/tax-on-your-private-pension
- Self Assessment tax returns ↗ https://www.gov.uk/self-assessment-tax-returns
Frequently asked questions
What rate do additional-rate taxpayers pay on dividends?
Does the dividend allowance apply at the additional rate?
At what income level does the 39.35% rate kick in?
Can I reduce the 39.35% rate on my dividends?
Is the effective rate really higher than 39.35% near £125,140?
Disclaimer: General information, not tax advice. At this income, pension contributions and the timing of dividends interact with the Personal Allowance taper; model both before acting.