Guide

Dividend Tax for Basic-Rate Taxpayers 2026/27

Reviewed by the UKDividendTaxCalculator team · Updated August 2026 · Checked against 2026/27 HMRC rates

If your total income stays under £50,270, you're a basic-rate taxpayer, and dividends above the £500 allowance are taxed at just 10.75%¹ for 2026/27. That's the lowest dividend rate there is. This guide shows how it's worked out and where the £500 allowance really goes.

Key takeaways

Basic-rate dividends are taxed at 10.75%¹ — far below the 20% you'd pay on salary.
The first £500 of dividends is tax-free¹; the allowance was £1,000 before April 2024, so old figures overstate the tax-free slice.
Any unused Personal Allowance (£12,570)² shelters dividends before the £500 allowance even starts.
Dividends are the top slice of income, so your salary decides how much basic-rate band is left for them.
You stay basic-rate only while total income — salary, pension and dividends combined — stays under £50,270².

The 10.75% basic-rate dividend tax

Basic-rate taxpayers pay 10.75% 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:

Non-savings income — salary, pension, self-employment. Fills the Personal Allowance first.
Savings income — bank interest and similar.
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

Salary £30,000, dividends £5,000, no other income, 2026/27. The salary is well above the Personal Allowance, so there's nothing spare to shelter the dividends. The whole lot stays inside the basic-rate band, so it's a clean 10.75% job.

Salary (uses Personal Allowance and part of the basic band)	£30,000
Dividends	£5,000
Dividend allowance (0%)	£500
Taxable dividends (£5,000 − £500)	£4,500
Total income £35,000 — still under £50,270, so all basic rate	—
£4,500 taxed at 10.75%	£483.75
Total dividend tax	£483.75

Assumes no savings interest or rental income — those would fill the bands before dividends. Here the allowance sits in the basic band too, but since every taxable pound is basic-rate anyway, it makes no difference to the final figure. The allowance only changes the answer when dividends straddle the £50,270 line.

2026/27 dividend tax rates at a glance

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 dividend income is covered by the dividend allowance¹ and is taxed at 0% — but it still takes up room in whichever band it lands in.

Calculate your dividend tax

Enter your salary and dividend income to see exactly how much dividend tax you owe at 10.75%, 35.75% or 39.35%.

Use the calculator

Sources & 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
Self Assessment tax returns ↗ https://www.gov.uk/self-assessment-tax-returns

Verified against published UK government guidance.

Frequently asked questions

Do basic-rate taxpayers pay dividend tax?

Yes. Basic-rate taxpayers pay 10.75% on dividend income above the £500 dividend allowance in 2026/27. The first £500 is tax-free. Only dividends above that threshold — and not sheltered by unused Personal Allowance — are taxed at 10.75%.

How does the £500 allowance work?

The £500 dividend allowance means the first £500 of dividend income in each tax year is completely free from dividend tax. It applies to every UK taxpayer regardless of their rate band. The allowance was reduced from £1,000 in April 2024 and stands at £500 for 2026/27.

Where do dividends sit in the tax calculation?

Dividends are treated as the top slice of income. Non-savings income (salary, pension) fills the Personal Allowance and rate bands first, then savings income, then dividends. This means your salary level directly affects how much basic-rate band is left for dividends before higher rates kick in.

What happens if my dividends push me over £50,270?

Only the part above £50,270 is charged at the higher rate. Say your salary and dividends together come to £55,000 — the dividends that fall below £50,270 stay at 10.75%, and only the £4,730 above it is taxed at 35.75%. You don't lose the basic rate on everything; the higher rate applies just to the slice in the higher band.

Do I need to tell HMRC about basic-rate dividends?

If your dividends are over £500 and under £10,000, you can either ask HMRC to change your tax code or register for Self Assessment. Above £10,000 you must file a Self Assessment return. Dividends inside an ISA never need reporting — they're tax-free and outside the system entirely.

Disclaimer: General information, not tax advice. A large dividend can take you past £50,270 on its own, so add it to your other income before relying on the 10.75% rate.