UK Dividend Tax Calculator 2025/26 | Calculate Dividend Tax Rates
Free UK Dividend Tax Calculator. Calculate tax on dividends with the £500 allowance. Basic rate 8.75%, higher 33.75%, additional 39.35%. Updated for 2025/26.
Last updated: February 2026
UK Dividend Tax Calculator 2025/26
Calculate how much tax you'll pay on your dividend income, including the £500 tax-free allowance
Dividend Tax Calculator
Your Dividend Tax Breakdown
UK Dividend Tax Rates 2025/26
Dividend tax rates are lower than income tax rates on salary, but this reflects that company profits have already been taxed via Corporation Tax before dividends are paid.
Basic Rate
On dividends in the basic rate band (income up to £50,270)
Higher Rate
On dividends in the higher rate band (£50,271-£125,140)
Additional Rate
On dividends above £125,140
How Dividend Tax is Calculated
- Add up all income: Combine your salary, pension, rental income and other non-dividend income
- Deduct Personal Allowance: The first £12,570 is tax-free (2025/26)
- Add dividends on top: Dividends are taxed after other income, potentially pushing you into higher bands
- Apply dividend allowance: First £500 of dividends is tax-free
- Tax at dividend rates: Remaining dividends taxed at 8.75%, 33.75% or 39.35%
Dividend Allowance History
The dividend allowance has been progressively reduced in recent years:
2025/26 - £500
Current allowance - significantly reduced from previous years
2023/24 - £1,000
Halved from the previous year
2022/23 - £2,000
Maintained for several years at this level
2018/19 to 2021/22 - £2,000
Reduced from the original £5,000 when dividends were reformed
2016/17 to 2017/18 - £5,000
The new dividend tax system was introduced
Salary vs Dividends: Which is Better?
For limited company directors, the optimal strategy often combines a low salary with dividends. Here's why:
| Factor | Salary | Dividends |
|---|---|---|
| Income Tax Rate | 20% / 40% / 45% | 8.75% / 33.75% / 39.35% |
| National Insurance | 8% employee + 15% employer | None |
| Corporation Tax | Deductible expense | Paid before distribution |
| Pension Contributions | Based on salary | Not included |
| State Pension | Builds qualifying years | Doesn't count |
| Mortgage Applications | Easier to prove | Can be harder |
Optimal Strategy 2025/26
Take a salary of £12,570 (uses Personal Allowance, builds NI record) and take remaining profit as dividends.
Most tax efficientAlternative Strategy
Salary of £9,100 (below NI threshold) + dividends. Lower admin cost but doesn't build full NI year.
Simpler optionDividend Tax Examples
Example 1: Basic Rate Taxpayer
Scenario: £30,000 salary + £10,000 dividends
- Salary uses up: £30,000 of basic rate band
- Dividend allowance: £500 tax-free
- Remaining dividends: £9,500 at 8.75%
- Dividend tax: £831.25
Example 2: Higher Rate Taxpayer
Scenario: £60,000 salary + £20,000 dividends
- Already in higher rate band from salary
- Dividend allowance: £500 tax-free
- Remaining dividends: £19,500 at 33.75%
- Dividend tax: £6,581.25
Example 3: Company Director
Scenario: £12,570 salary + £50,000 dividends from own company
- Salary uses Personal Allowance: No income tax
- Dividend allowance: £500 tax-free
- Basic rate band remaining: £37,700
- Dividends at basic rate: £37,700 x 8.75% = £3,298.75
- Dividends at higher rate: £11,800 x 33.75% = £3,982.50
- Total dividend tax: £7,281.25
Reporting Dividend Income to HMRC
When You Must File Self-Assessment
- Dividend income exceeds £10,000
- You're a company director
- You have other untaxed income
- Your total income exceeds £100,000
Key Deadlines
| Action | Paper Return | Online Return |
|---|---|---|
| Tax return deadline (2025/26) | 31 October 2025 | 31 February 2026 |
| Pay tax owed | 31 February 2026 | |
| Second payment on account | 31 July 2026 | |
Dividend Tax Planning Tips for 2025/26
With the dividend allowance now at just £500, effective tax planning has never been more important for UK shareholders and company directors. Here are practical strategies to legally minimise your dividend tax bill in the 2025/26 tax year.
Understanding the Dividend Allowance Reduction Impact
The reduction of the dividend allowance from £2,000 (2022/23) to just £500 (2025/26) has significantly increased the tax burden on dividend income. For a higher rate taxpayer receiving £20,000 in dividends, the additional tax caused by the allowance reduction is £506.25 per year compared to the £2,000 allowance era. This makes it essential to explore every legitimate avenue for reducing your exposure to dividend tax.
Use Pension Contributions to Reduce Your Tax Band
One of the most powerful strategies for reducing dividend tax is to make personal pension contributions. Pension contributions effectively extend your basic rate band because the contribution is deducted from your total income when determining your tax band. For example, if your total income (salary plus dividends) pushes you into the higher rate band at 33.75%, making a £10,000 pension contribution could bring some or all of your dividends back into the basic rate band at 8.75%, saving you up to £2,500 in dividend tax. The annual pension allowance for 2025/26 is £60,000, giving significant scope for tax-efficient contributions.
Transferring Shares to a Spouse or Civil Partner
If your spouse or civil partner is a non-taxpayer or basic rate taxpayer, transferring dividend-producing shares to them can result in substantial tax savings. Transfers between spouses are exempt from Capital Gains Tax, and each spouse has their own £500 dividend allowance and Personal Allowance of £12,570. For a couple where one partner earns £80,000 and the other has no income, redirecting £12,570 of dividends to the non-earning spouse could save up to £4,243 in tax annually (£12,570 covered by the Personal Allowance at 0%, rather than taxed at 33.75%). However, the transfer must be genuine and the recipient must have beneficial ownership of the shares. HMRC may challenge arrangements where the transferor retains practical control over the income.
Maximise Your ISA Allowance
Dividends received within a Stocks and Shares ISA are completely tax-free, regardless of the amount. The ISA allowance for 2025/26 is £20,000 per person. If you hold dividend-paying shares outside an ISA, consider gradually transferring them into your ISA wrapper (known as "Bed and ISA"). This involves selling the shares, transferring the cash into your ISA, and repurchasing the same shares within the ISA. While you may trigger Capital Gains Tax on the sale, any future dividends will be entirely free from tax. Over time, this strategy can save thousands of pounds for investors with significant dividend portfolios.
Timing Your Dividend Declarations
Company directors who control when dividends are declared can use timing to their advantage. If you are approaching the end of a tax year and have already used your basic rate band, consider deferring a dividend payment to the next tax year when you may have unused allowances. Similarly, if you know your income will be lower in the following year (perhaps due to planned maternity leave, a sabbatical, or a change in business circumstances), delaying dividend payments can result in them being taxed at a lower rate. Always ensure that dividends are properly documented with board minutes and dividend vouchers, as HMRC requires evidence that dividends were formally declared.
Frequently Asked Questions
In 2025/26, UK dividend tax rates are: 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers, and 39.35% for additional rate taxpayers. You get a £500 tax-free dividend allowance. Dividends are taxed after your other income, so they can push you into higher tax bands.
No, you don't pay National Insurance on dividend income. This is one of the main tax advantages of taking dividends instead of salary for company directors. However, dividends don't count towards your State Pension qualifying years, so you should take at least a minimum salary to protect your NI record.
Yes, but your Personal Allowance (£12,570) is used first against your other income (salary, pension, etc.). If you have no other income, dividends can use your Personal Allowance tax-free. You also get the additional £500 dividend allowance on top of this.
The most tax-efficient approach for 2025/26 is typically: take a salary of £12,570 (uses your Personal Allowance and builds NI record), then take remaining profits as dividends. You'll pay 8.75% dividend tax on earnings up to £50,270, compared to 20% income tax plus 8% NI on salary.
Yes, foreign dividends are taxed at the same UK rates. However, you may have already paid withholding tax in the country where the dividend originated. You can often claim relief for this through the UK's double taxation agreements, reducing your UK tax bill.
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Expert Reviewed — This calculator is reviewed by our team of financial experts and updated regularly with the latest UK tax rates and regulations. Last verified: February 2026.
Last updated: February 2026 | Verified with latest UK rates
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