Dividend tax calculator
Dividends are taxed on top of your salary or pension, so your other income decides the rate. This shows the tax, the band split, and what the £500 allowance is worth.
How dividends are taxed on top of income
Dividends are the last slice of your income to be taxed. Your salary or pension uses the £12,570 personal allowance and fills the basic-rate band first, then dividends stack on top of that. The band the top slice reaches sets the rate, which is why a modest salary and a large dividend can be cheap, while a salary already near £50,270 makes the same dividend expensive.
The £500 dividend allowance is taxed at 0%, but it is a zero-rate band, not a deduction. It still uses up space in whatever band it sits in, so it does not lift the threshold at which your dividends move from basic to higher rate. Above the allowance, the 2026/27 rates are 10.75%, 35.75% and 39.35%. The basic and higher rates went up by two percentage points from 6 April 2026, so a bill on the same dividends is higher than in earlier years.
Worked example
On a £45,000 salary with £10,000 of dividends, the salary uses the personal allowance and most of the basic-rate band. The first £500 of dividends is tax-free. The next slice fills what is left of the basic-rate band at 10.75%, and the rest crosses £50,270 and is taxed at 35.75%. The total comes to £2,204, so you keep £7,796 of the £10,000.
Common questions
How much can I earn in dividends before paying tax?
The dividend allowance is £500 for 2026/27. The first £500 of dividends is taxed at 0%, but it still counts towards your bands, so it can push later dividends into a higher rate.
What are the dividend tax rates for 2026/27?
Above the £500 allowance, dividends are taxed at 10.75% in the basic-rate band, 35.75% in the higher-rate band and 39.35% in the additional-rate band. The basic and higher rates each rose by two percentage points from 6 April 2026.
Why does my salary decide the tax rate on my dividends?
Dividends sit on top of your other income. Your salary or pension fills the tax-free allowance and the lower bands first, then the dividends stack on top. Whatever band that top slice reaches sets the rate, so the same dividend costs more once your salary is near the higher-rate threshold.
Do dividends count towards the £50,270 higher-rate threshold?
Yes. Dividends are part of your total income for working out which band you are in. A salary just below £50,270 plus dividends can tip the dividends over the line, taxing the part above at the higher dividend rate.
Do I pay National Insurance on dividends?
No. Dividends are not earnings, so there is no National Insurance on them. That is why company directors often take a small salary and the rest as dividends, though the gap has narrowed as dividend rates have risen.