Dividend Tax for Basic-Rate Taxpayers 2026/27

For 2026/27, dividends in the basic-rate band are taxed at 8.75% after the £500 dividend allowance. If your total income keeps you within the basic-rate band, this guide explains exactly how that works, with a worked example.

Published by the UK Money Calculators editorial team. Last updated for the 2026/27 tax year.

The 8.75% basic-rate dividend tax

Basic-rate taxpayers pay 8.75% on dividends above the £500 allowance in 2026/27. You stay a basic-rate taxpayer as long as total income — salary, pension, dividends, everything — stays below £50,270.

The rate is lower than income tax (20%) because dividends come from company profits that have already been taxed.

The £500 dividend allowance

Every UK taxpayer gets a £500 dividend allowance. The first £500 of dividend income each year is free from dividend tax regardless of your rate band or how large your total dividends are.

The allowance was £1,000 in 2023/24 and £2,000 before that. Using the old figures will understate your tax bill. For 2026/27 it is £500.

How dividends sit in the tax calculation

HMRC stacks income in a fixed order:

1. Non-savings income — salary, pension, self-employment. Fills the Personal Allowance first.
2. Savings income — bank interest and similar.
3. Dividend income — sits on top.

Dividends sit at the top, so your salary determines how much basic-rate band is left for them. A salary of £30,000 leaves £20,270 of basic-rate band before the higher rate kicks in (£50,270 − £30,000 = £20,270).

Using the Personal Allowance against dividends

The Personal Allowance is £12,570 and goes against non-savings income first. If your salary is below £12,570, the unused portion can shelter some dividend income entirely.

Say your salary is £8,000. The remaining £4,570 of Personal Allowance (£12,570 − £8,000) covers the first £4,570 of dividends tax-free. The £500 dividend allowance then applies on top of that.

Worked example — £30,000 salary and £5,000 dividends

Scenario: Salary £30,000, dividends £5,000 in 2026/27.

• Salary of £30,000 fully exceeds the Personal Allowance of £12,570. No unused Personal Allowance to shelter dividends.
• Dividends sit on top of the £30,000 salary.
• First £500 of dividends: covered by the dividend allowance — £0 tax.
• Remaining taxable dividends: £5,000 − £500 = £4,500.
• Total income with dividends: £30,000 + £5,000 = £35,000 — still within the basic-rate band (£50,270).
• Dividend tax: £4,500 × 8.75% = £483.75.
• Total dividend tax: £483.75.

This assumes no other income. If you also have savings interest or rental income, those would also count towards the rate bands.

2026/27 dividend tax rates at a glance

The first £500 of dividend income is covered by the dividend allowance and is free from tax at all rates.