Free UK Tax & Financial Calculators
Calculate how much tax you'll pay on your dividend income, including the £500 tax-free allowance
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.
On dividends in the basic rate band (income up to £50,270)
On dividends in the higher rate band (£50,271-£125,140)
On dividends above £125,140
The dividend allowance has been progressively reduced in recent years:
Current allowance - significantly reduced from previous years
Halved from the previous year
Maintained for several years at this level
Reduced from the original £5,000 when dividends were reformed
The new dividend tax system was introduced
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 + 13.8% 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 |
Take a salary of £12,570 (uses Personal Allowance, builds NI record) and take remaining profit as dividends.
Most tax efficientSalary of £9,100 (below NI threshold) + dividends. Lower admin cost but doesn't build full NI year.
Simpler optionScenario: £30,000 salary + £10,000 dividends
Scenario: £60,000 salary + £20,000 dividends
Scenario: £12,570 salary + £50,000 dividends from own company
| Action | Paper Return | Online Return |
|---|---|---|
| Tax return deadline (2025/26) | 31 October 2025 | 31 January 2026 |
| Pay tax owed | 31 January 2026 | |
| Second payment on account | 31 July 2026 | |
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.
✓ 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: January 2026.
Last updated: January 2026 | Verified with latest UK rates