Methodology

How we calculate UK dividend tax

A plain-English explanation of the 2026/27 dividend tax rules used by this calculator.

1. Salary fills the bands first

Your salary and other non-dividend income (after any pension contributions) is placed against the Personal Allowance of £12,570 first. Any remaining non-dividend taxable income fills the basic-rate band (up to £37,700 of taxable income) and then the higher-rate band (up to £74,870 of taxable income above basic limit). Dividends then sit on top of this.

2. Dividends and the Personal Allowance

If any Personal Allowance remains after covering non-dividend income, it is applied to dividends next. Above £100,000 of total gross income, the Personal Allowance tapers at £1 removed for every £2 of income above £100,000, reducing to zero at £125,140.

3. The £500 dividend allowance

After the Personal Allowance, the next £500 of dividend income is covered by the dividend allowance and is not taxed. This allowance applies regardless of tax band. It was reduced from £1,000 in April 2024 and from £2,000 in April 2023.

4. Dividend tax rates 2026/27

Taxable dividends above the £500 allowance are taxed at the following rates for 2026/27:

Band Total income range 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%

5. What this calculator does not cover

  • Corporation tax: This calculator covers personal dividend tax only. Corporation tax on company profits is separate and not modelled here.
  • ISA dividends: Dividends within a Stocks and Shares ISA are exempt from tax and do not count towards the dividend allowance. This calculator assumes all dividends are outside an ISA.
  • Scotland income tax rates: Scotland has different income tax rates for non-savings income. However, dividend tax rates are set UK-wide and apply equally in Scotland — this calculator correctly applies the UK-wide dividend rates.
  • Trust or foreign income: Dividend income from trusts or foreign sources may be subject to different rules not covered here.
  • Tax credits on dividends: UK dividend tax credits were abolished in 2016. There are no notional tax credits to offset.

6. Sources

Rates sourced from GOV.UK: Tax on dividends and HMRC rates and thresholds. Updated for the 2026/27 tax year (6 April 2026 – 5 April 2027).