Dividend Tax Calculator
Calculate exactly how much UK dividend tax you owe in 2025/26. Covers the £500 allowance, all three tax bands, director salary strategies and ISA planning.
Last updated: February 2026 | Tax year: 6 April 2025 – 5 April 2026
📈 Dividend Tax Calculator 2025/26
Enter your dividend income and any other income (salary, pension, self-employment). The calculator applies the correct 2025/26 rates, £500 dividend allowance and personal allowance.
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Your 2025/26 Dividend Tax Results
Dividend Tax Breakdown
| Band | Dividend Amount | Rate | Tax Due |
|---|
📋 Dividend Tax Rates 2025/26
For the 2025/26 tax year (6 April 2025 to 5 April 2026), HMRC applies the following dividend tax rates. These rates are lower than the equivalent income tax rates — dividends do not attract National Insurance.
| Tax Band | Total Income | Dividend Rate | Equivalent Income Tax Rate | NI on Dividends? |
|---|---|---|---|---|
| Dividend Allowance | First £500 of dividends | 0% (tax-free) | N/A | No |
| Basic Rate | £12,571 – £50,270 total income | 8.75% | 20% | No |
| Higher Rate | £50,271 – £125,140 total income | 33.75% | 40% | No |
| Additional Rate | Over £125,140 total income | 39.35% | 45% | No |
Personal Allowance reminder: The personal allowance (£12,570) can be used against dividend income if you have no other income. Dividends covered by the personal allowance are tax-free. The £500 dividend allowance is separate from and in addition to the personal allowance.
🕑 Historical Dividend Tax Rates & Allowances (2020/21 – 2025/26)
The dividend allowance has been cut sharply since 2022/23, significantly increasing the tax burden on investors and directors who rely on dividends.
| Tax Year | Dividend Allowance | Basic Rate | Higher Rate | Additional Rate | Note |
|---|---|---|---|---|---|
| 2020/21 | £2,000 | 7.5% | 32.5% | 38.1% | Pre-reform rates |
| 2021/22 | £2,000 | 7.5% | 32.5% | 38.1% | No change |
| 2022/23 | £2,000 | 8.75% | 33.75% | 39.35% | Rates increased +1.25% |
| 2023/24 | £1,000 | 8.75% | 33.75% | 39.35% | Allowance halved |
| 2024/25 | £500 | 8.75% | 33.75% | 39.35% | Allowance halved again |
| 2025/26 (current) | £500 | 8.75% | 33.75% | 39.35% | Current Year |
Impact of allowance cuts: A basic rate taxpayer receiving £5,000 in dividends paid £262.50 tax in 2022/23 (on £3,000 after the £2,000 allowance). In 2025/26 the same dividends generate £393.75 tax (on £4,500 after the £500 allowance) — a 50% increase in dividend tax, despite no change in income.
📚 How UK Dividend Tax Works in 2025/26
Understanding the order in which HMRC taxes dividends is crucial to calculating your bill correctly. Dividends are always placed on top of all other income in the tax calculation.
Step-by-step: How HMRC calculates dividend tax
- Add all income together: Add your salary, pension, self-employment profits, rental income and dividend income to get your total income.
- Apply the personal allowance: The first £12,570 is tax-free (your personal allowance). This is set first against non-dividend income. If your non-dividend income is below £12,570, the remainder of the personal allowance covers dividends.
- Stack dividends on top: After your other income fills the tax bands, your dividends are placed on top. They occupy whatever tax band they fall into.
- Apply the £500 dividend allowance: The first £500 of dividends (wherever they fall in the bands) is tax-free.
- Apply dividend tax rates: The remainder is taxed at 8.75% (basic), 33.75% (higher) or 39.35% (additional), depending on which band the dividends occupy.
Worked Examples
Example 1: £10,000 dividends, no other income
Dividend income£10,000
Less: personal allowance-£10,000
Dividends above personal allowance£0
Less: dividend allowance£0 (not needed)
Taxable dividends£0
Dividend tax due£0.00
Example 2: £10,000 dividends + £40,000 salary
Total income£50,000
Salary fills bands (£40,000 - £12,570 PA)£27,430 taxed
Remaining basic rate band£10,270
Dividends in basic band£10,000
Less: dividend allowance-£500
Taxable at 8.75%£9,500 × 8.75%
Dividend tax due£831.25
Example 3: £20,000 dividends + £45,000 salary
Total income£65,000
Remaining basic rate band after salary£5,270
Dividends in basic rate band£5,270
Dividends in higher rate band£14,730
Less: dividend allowance (from basic band)-£500
Tax: £4,770 × 8.75%£417.38
Tax: £14,730 × 33.75%£4,971.38
Total dividend tax£5,388.75
Example 4: £15,000 dividends, sole income
Total dividend income£15,000
Less: personal allowance-£12,570
Dividends above personal allowance£2,430
Less: dividend allowance-£500
Taxable at 8.75%£1,930 × 8.75%
Dividend tax due£168.88
Key rule: The dividend allowance of £500 is not a deduction from gross dividends before stacking. It is a zero-rate band applied to the first £500 of dividends that would otherwise be taxable. It does not change which tax band your dividends fall into — it simply means that first £500 within whichever band is taxed at 0%.
🏢 Director Strategy: Optimal Salary + Dividends 2025/26
For limited company directors, the combination of a low salary and dividends is typically far more tax-efficient than drawing a large salary. Here is the standard approach for 2025/26.
The Classic Director Combination
Scenario: Director draws £12,570 salary + £37,700 dividends = £50,270 total
Salary£12,570
Dividend income£37,700
Income tax on salary (covered by personal allowance)£0.00
Employee National Insurance on salary (above £12,570 threshold)£0.00
Dividend allowance used£500 @ 0%
Dividends taxed at basic rate (£37,200 × 8.75%)£3,255.00
Corporation tax on profits (assume 19% small profits rate)Paid by company
Total personal tax on £50,270 drawn£3,255.00
Effective personal tax rate6.47%
Why This Works
- No income tax on salary: The £12,570 salary exactly matches the personal allowance, so no income tax is due on it.
- No NI on salary: At £12,570, employee NI is at the threshold — the employee pays zero NI. The employer (your company) also pays zero employer NI at this level. If the company has no other employees, the Employment Allowance cannot offset employer NI, so keeping salary at or below the NI secondary threshold (£9,100) is sometimes preferred — but this means a smaller salary tax-free base.
- Low dividend tax rate: All dividends fall within the basic rate band and are taxed at only 8.75%, versus 20% income tax + 8% NI if taken as salary.
- Total retained: On £50,270 drawn, personal tax is just £3,255 — an effective rate of 6.47%. As a salaried employee earning £50,270, income tax and NI would total approximately £11,232 — an effective rate of 22.3%.
NI Threshold Consideration (2025/26)
| Salary Level | Employee NI | Employer NI | State Pension Credit | Best For |
|---|---|---|---|---|
| £6,396 (LEL) | £0 | £0 | Yes (qualifying year) | Sole director, no EA |
| £9,100 (ST) | £0 | £0 | Yes (qualifying year) | Sole director, no EA |
| £12,570 (PA) | £0 | £495.90 | Yes (qualifying year) | Company claims Employment Allowance |
LEL = Lower Earnings Limit; ST = Secondary Threshold; PA = Personal Allowance; EA = Employment Allowance. Sole directors without other employees cannot claim the Employment Allowance from April 2020.
Always consult an accountant: The optimal director salary level depends on your company's specific circumstances, whether you have other employees, your Employment Allowance eligibility, and any other income you receive. This calculator provides a guide — professional advice is recommended for your final decision.
⚖ Dividend vs Salary: Tax Comparison 2025/26
This table compares the total tax burden of taking income as dividends versus employment salary at different income levels, assuming a director scenario (income from own limited company, no other income).
| Total Income Drawn | Dividends: Personal Tax | Salary: Income Tax + NI | Tax Saving (Dividends) | Effective Rate (Dividends) | Effective Rate (Salary) |
|---|---|---|---|---|---|
| £12,570 | £0.00 | £0.00 | £0.00 | 0.0% | 0.0% |
| £20,000 | £649.63 | £2,186.00 | £1,536.37 | 3.2% | 10.9% |
| £30,000 | £1,524.63 | £4,686.00 | £3,161.37 | 5.1% | 15.6% |
| £50,270 | £3,255.00 | £11,232.00 | £7,977.00 | 6.5% | 22.3% |
| £80,000 | £13,255.00 | £26,232.00 | £12,977.00 | 16.6% | 32.8% |
| £100,000 | £19,999.25 | £35,032.00 | £15,032.75 | 20.0% | 35.0% |
| £125,140 | £28,481.75 | £50,032.00 | £21,550.25 | 22.8% | 40.0% |
Salary figures assume standard employee NI at 8% and income tax at 20%/40%. Dividend figures assume optimal salary + dividends strategy. Both include standard personal allowance. Corporation tax and employer NI excluded. For illustration only.
No NI on dividends: This is the single biggest advantage of dividends over salary. Employees pay 8% NI on earnings between £12,570 and £50,270, and employers pay 13.8% on all earnings above £9,100. Dividends attract zero NI from either party, making them significantly cheaper for both director and company.
📄 Reporting Dividends: Self Assessment Guide
Unlike salary income collected via PAYE, dividends must be reported by you through Self Assessment if any tax is owed. Here is everything you need to know.
When must you register for Self Assessment?
- Your dividend income exceeds £500 in the tax year and you have tax to pay on them
- Your total income (including dividends) exceeds £100,000
- You are a company director (HMRC generally requires directors to file)
- You have other untaxed income (rental, self-employment, foreign income)
- You need to claim tax reliefs not available through PAYE
Key Dates
| Date | Action Required |
|---|---|
| 5 October 2026 | Register for Self Assessment if you are new to it (for 2025/26 tax year) |
| 31 October 2026 | Deadline for paper Self Assessment tax return (2025/26) |
| 31 January 2027 | Deadline for online Self Assessment tax return and payment of tax due |
| 31 July 2027 | Second payment on account (if applicable) |
Can HMRC collect via PAYE?
If you owe less than £3,000 in dividend tax and you also have a PAYE income source, HMRC may be able to collect the tax through your tax code in the following year rather than requiring a Self Assessment payment. However, if you are a director or your circumstances are complex, filing Self Assessment is almost always required regardless.
Penalties for late filing: Filing a Self Assessment return late incurs an automatic £100 penalty, rising to £10 per day after 3 months (maximum £900 for 90 days), and further penalties after 6 and 12 months. Late payment interest also accrues on unpaid tax.
❓ Frequently Asked Questions: UK Dividend Tax 2025/26
Answers to the most common questions about dividend tax in the 2025/26 tax year.
The dividend allowance for 2025/26 is £500. This is the amount of dividend income you can receive each tax year without paying dividend tax on it, regardless of how much other income you have. The allowance was £1,000 in 2024/25 and has been progressively reduced from £5,000 in 2016/17. Even if you receive dividends above £500, the first £500 is taxed at 0% (the dividend nil rate). The allowance does not reduce your total income for the purpose of determining which tax band applies — it simply means the first £500 of dividends is taxed at a 0% rate.
For 2025/26, dividend tax rates are: 8.75% for basic rate taxpayers (total income up to £50,270), 33.75% for higher rate taxpayers (total income £50,271–£125,140), and 39.35% for additional rate taxpayers (total income over £125,140). These rates apply after the £500 dividend allowance. They are significantly lower than the equivalent income tax rates (20%, 40%, 45%) and dividends do not attract National Insurance contributions.
If your total dividend income is £500 or less, you owe no dividend tax. You may not need to register for Self Assessment solely because of dividends at this level. However, if you are already required to file a Self Assessment return for other reasons (e.g., you are a director, you have self-employment income, or your total income exceeds £100,000), you must still include your dividend income on the return even if it is below £500. HMRC does not require you to register for Self Assessment just because you receive dividends under the allowance, provided you have no other reason to file.
Your salary fills the tax bands first. Your personal allowance (£12,570) is applied to your salary, then your salary continues to fill the basic rate band (£12,571–£50,270). Dividends are then stacked on top. For example, if your salary is £40,000, you have used £40,000 – £12,570 = £27,430 of the basic rate band. The remaining basic rate band is £50,270 – £40,000 = £10,270. The first £10,270 of your dividends falls in the basic rate band at 8.75%; any dividends above £10,270 (which would take your total income above £50,270) fall in the higher rate band at 33.75%. The first £500 of dividends is always taxed at 0%.
For most directors in 2025/26, the most tax-efficient combination is a salary of £12,570 (matching the personal allowance) with the rest taken as dividends up to the basic rate limit. At a salary of £12,570, no income tax is payable. Employee NI is also zero at this level. If the company has only one director and no other employees, it cannot claim the Employment Allowance, so employer NI becomes payable on salary above the secondary threshold of £9,100. In that case, some directors set salary at £9,100 to avoid any NI, accepting a slightly smaller tax-free salary. The remaining basic rate band (£50,270 minus your salary) can be taken as dividends at 8.75% after the £500 allowance. Always consult a qualified accountant for your specific situation.
No. Dividends are not subject to National Insurance contributions — neither employee NI nor employer NI. This is one of the main tax advantages of dividends over salary. Only earned income (employment wages, self-employment profits, directors' fees paid as salary) is subject to NI. Dividend income, investment income, rental income and pension income are all outside the scope of National Insurance.
Yes — if your dividend income exceeds £500 and you have tax to pay on it, you must report it via Self Assessment. The deadline for online returns is 31 January 2027 for the 2025/26 tax year. If your dividend tax is under £3,000 and you also have a PAYE income, HMRC may be able to collect it through your tax code instead, but you still need to file a return. Company directors are almost always required to file Self Assessment regardless of their dividend level. Register by 5 October 2026 if this is your first time filing.
Yes, completely. Dividends from shares held inside a Stocks and Shares ISA are entirely tax-free. They do not use up your £500 dividend allowance, and they do not appear on your Self Assessment return. This makes ISA investing extremely tax-efficient for dividend investors. The annual ISA allowance for 2025/26 is £20,000. If you regularly receive dividend income from shares, investing through an ISA should be the first step in your tax planning strategy.
If your total income (salary + dividends + any other income) exceeds £100,000, your personal allowance is tapered. For every £2 of income above £100,000, you lose £1 of personal allowance. By the time income reaches £125,140, the personal allowance is completely lost. This creates an effective marginal income tax rate of approximately 60% on income between £100,000 and £125,140. For dividend income falling in this range, the effective rate is the higher rate of 33.75% plus the additional income tax on lost allowance. Pension contributions are particularly effective at reducing income below £100,000 to restore your personal allowance.
Yes. If dividends are your only source of income, your full personal allowance of £12,570 is applied against your dividend income first. Only dividends above £12,570 are potentially taxable. After the personal allowance, the £500 dividend allowance applies to the next £500 of dividends. So if your dividends total £13,070 or less and you have no other income, no dividend tax is due. This makes dividend-only income very efficient for lower amounts — a sole investor or retiree relying solely on dividends can receive up to £13,070 per year completely tax-free.
The dividend allowance has been cut dramatically: from £5,000 (2016/17), to £2,000 (2018/19–2022/23), to £1,000 (2023/24–2024/25), to £500 (2025/26 onwards). For a basic rate taxpayer who receives £5,000 in dividends, this means their annual dividend tax bill has increased from £225 in 2016/17 (on £3,000 after the allowance, at 7.5%) to £393.75 in 2025/26 (on £4,500 after the £500 allowance, at 8.75%) — a 75% increase in dividend tax despite no change in income. Higher rate taxpayers face even larger increases. The reductions particularly affect investors with share portfolios outside of ISAs and limited company directors who take dividends.
Foreign dividends received by UK residents are taxable in the UK in the same way as UK dividends — the same £500 allowance and rates (8.75%, 33.75%, 39.35%) apply. Foreign tax withheld at source may be offset against your UK tax liability through double taxation relief, but you cannot receive a refund if the foreign tax exceeds your UK liability. You must declare foreign dividends on your Self Assessment return. Foreign dividends received inside an ISA remain tax-free in the UK (though foreign withholding tax may still apply and cannot be reclaimed from within an ISA).
🔗 Related Tax Calculators
Use these free UK calculators alongside the dividend tax calculator for complete tax planning.
Disclaimer & Important Notice
This dividend tax calculator is provided for general guidance only. It uses 2025/26 HMRC rates and standard assumptions. Individual tax positions vary depending on your personal circumstances, other income sources, pension contributions, relief claims and HMRC adjustments. The results should not be treated as tax advice. UK Calculator Ltd recommends consulting a qualified accountant or tax adviser (e.g., a Chartered Accountant, CTA or ICAEW member) before making financial decisions based on dividend tax planning. Tax law can change — always check HMRC's website (gov.uk/income-tax) for the latest confirmed rates.