How we calculate UK dividend tax

How we check the calculator

On 3 November 2026 we checked every calculator against a separate reference version of the rules, written from GOV.UK and HMRC guidance rather than our own code, across thousands of combinations including every threshold. We fixed every difference we found. Fixed test cases with hand-worked answers are part of the site's automated tests, and we run them whenever we change a calculator.

The check covered combinations of salary, dividends, other income and pension contributions, including the £500 dividend allowance, the £12,570 Personal Allowance, £50,270, the £100,000 taper and £125,140. On 7 November 2026 we changed how personal pension contributions are treated, so they now extend the bands as the law says (see "How pension contributions are handled" below). The home page and the other calculators run one shared engine, and the tables of worked figures on our pages are produced by the same rules, so they cannot drift apart.

The last full check was on 3 November 2026. We plan to check again after every Budget and before each new tax year. If you spot something wrong, tell us and we will correct it.

1. Salary fills the bands first

Your salary and other non-dividend income (after any salary sacrifice or net pay pension deduction) 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 (from £37,700 to £125,140 of taxable income). A personal pension contribution under relief at source moves both of those limits up by the gross contribution. 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 adjusted net income (total income less gross personal pension contributions and any net pay deduction), 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:

Worked check: one figure, step by step

This is how the engine arrives at the dividend tax for someone with a £45,000 salary and £10,000 of dividends in 2026/27. The figures below are printed by the same code the calculators run, so if the page and the calculator ever disagreed, a test would fail.

1. The salary uses the £12,570 Personal Allowance, leaving £32,430 of taxable salary in the basic-rate band.
2. That leaves £5,270 of the £37,700 basic-rate band for dividends.
3. The first £500 of dividends is taxed at 0% by the dividend allowance, and uses £500 of that band.
4. £4,770 of dividends fits in the rest of the band, taxed at 10.75%.
5. The remaining £4,730 is above the band, taxed at 35.75%.
6. Total dividend tax: £2,203.75, an effective 22.04% of the dividends.

Amounts are kept to the penny inside the engine; tables on the guides round to whole pounds except the tax itself.

How pension contributions are handled

The home page calculator has two pension boxes, because the law treats the two kinds of contribution differently.

Personal pension contributions (relief at source). This is a SIPP, personal or stakeholder pension you pay into yourself. You enter the gross figure: what you pay plus the 20% basic-rate relief your provider claims, so £4,000 paid is £5,000 gross. The engine does not take it off your salary. Instead it raises your basic rate limit and your higher rate limit by the gross contribution, which is how the law gives higher-rate relief (Finance Act 2004, section 192(4)). It also takes the gross contribution off adjusted net income before the £100,000 taper is tested (Income Tax Act 2007, section 58).

Salary sacrifice or net pay. Your employer takes the contribution out of your pay before tax. The engine takes it off your salary, so it lowers your taxable pay and your adjusted net income.

The two give the same dividend tax as long as the contribution is no larger than your salary above the Personal Allowance. They differ for a director on a low salary. With a £12,570 salary and £50,000 of dividends, dividend tax is £8,396.25 with no contribution. A £5,000 gross personal contribution moves the basic-rate band to £42,700 of taxable income, so £42,200 of dividends is taxed at 10.75% and £7,300 at 35.75%: £7,146.25. Taking the contribution off the salary instead would free £5,000 of Personal Allowance for the dividends and give £6,608.75, which is £537.50 too little; the calculator worked that way until 7 November 2026.

Tax relief is limited to your relevant UK earnings for the year, or £3,600 gross if that is more (Finance Act 2004, section 190). Salary counts as earnings; dividends do not. So the engine extends the band by no more than your salary (or £3,600), and a director on £12,570 can get relief on up to £12,570 of gross personal contributions. Company (employer) contributions are not your income and do not go in either box. You claim the higher-rate part of relief at source through Self Assessment (GOV.UK: pension tax relief).

Earlier tax years

The past-years calculator uses these rates and allowances. The Personal Allowance (£12,570) and basic-rate band (£37,700) were the same in every one of these years.

Budget 2026 (28 October 2026) left the 2026/27 rates and the £500 allowance unchanged for 2027/28; see our Budget 2026 page.

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 and bands are set UK-wide and apply equally in Scotland, so this calculator applies the UK-wide dividend rates.
• Trust income: Dividend income received through a trust may be subject to different rules not covered here.
• Foreign dividends: This calculator treats every dividend as a UK dividend. Foreign withholding tax and the foreign tax credit you can claim are worked out in the foreign dividend tax calculator.
• Tax credits on dividends: UK dividend tax credits were abolished in 2016. There are no notional tax credits to offset.
• Savings interest and bond fund distributions: interest is taxed under separate rules with its own allowance, so the calculators leave it out. Dividends and savings interest and fund distributions explain where the line falls.
• The Child Benefit charge: dividends count towards it, but we do not work out the charge in pounds; dividends and Child Benefit shows the percentage from the legal formula.

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).