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.
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 Your Personal Allowance is being withdrawn in that range, creating an effective marginal rate of 60% on non-savings income.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. The £120,000 of salary already exhausts the Personal Allowance (tapered to £0) and fills the basic and higher bands, so all the dividends sit in the additional-rate band.
| Total income | £140,000 |
| Personal Allowance (tapered to zero above £125,140) | £0 |
| Dividends (all in the additional-rate band) | £20,000 |
| Dividend allowance (0%) | £500 |
| Taxable dividends (£20,000 − £500) | £19,500 |
| £19,500 taxed at 39.35% | £7,673.25 |
| Total dividend tax | £7,673.25 |
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.