Dividend Tax for Additional-Rate Taxpayers 2026/27

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.

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.

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 Your Personal Allowance is being withdrawn in that range, creating an effective marginal rate of 60% on non-savings income.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

Scenario: Total income £140,000, dividends £20,000 (included within the £140,000 total) in 2026/27.

• Total income of £140,000 exceeds £125,140 — additional-rate taxpayer.
• Personal Allowance: £0 (fully tapered away above £125,140).
• All dividend income sits in the additional-rate band.
• First £500 of dividends: covered by the dividend allowance — £0 tax.
• Taxable dividends: £20,000 − £500 = £19,500.
• Dividend tax: £19,500 × 39.35% = £7,673.
• Total dividend tax: £7,673.

Non-dividend income tax (on salary, pension etc.) is separate from this calculation.

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

The first £500 of dividends each year is free from tax at all rates. No Personal Allowance applies above £125,140.