Dividend Tax Calculator — United Kingdom 2026-27
Understand the tax implications of your dividend income.
Estimate UK dividend tax with dividend allowance, income-tax band, cash dividends, taxable dividend income, and post-tax income outcomes.
UK Dividend Tax Notes
UK dividend tax is driven by dividend allowance, income band, and after-tax income, and whether dividend income sits above your available allowances.
There is no company-tax credit attached to UK dividends — the calculator simply applies the £500 dividend allowance, then the 2026/27 band rates of 10.75%, 35.75%, and 39.35%.
UK-specific treatment for dividend tax: figures are framed in pounds, with British household or business wording and the assumptions commonly seen in PAYE, HMRC, mortgage, pension, and consumer-credit contexts.
Watch for UK markers in the page copy and inputs: HMRC, PAYE, National Insurance, pension contributions, stamp duty land tax, miles, APR, part-exchange, council tax, VAT, and GBP-based totals.
The result should be read as a United Kingdom estimate, so compare it with UK provider quotes, HMRC or GOV.UK guidance, lender affordability rules, devolved-nation differences, or regulated advice where needed.
Assumes dividends held outside an ISA or pension. 2026/27 rates: 10.75% basic, 35.75% higher, 39.35% additional.
The UK abolished the dividend tax credit in April 2016. Today the first £500 of dividends is tax-free (the dividend allowance), and dividends above that are taxed at 10.75%, 35.75%, or 39.35% depending on your Income Tax band.
If your dividends are under the £500 allowance, or your total income is within your £12,570 personal allowance, you pay no dividend tax. Dividends held inside an ISA are always tax-free regardless of amount.
Dividends on shares and funds held inside a Stocks & Shares ISA are completely tax-free — no dividend tax, no need to report them. You can pay in up to £20,000 per tax year across your ISAs.
If dividends over the allowance total £10,000 or less, HMRC can collect the tax through your PAYE code or a simple Self Assessment. Above £10,000 you must file a Self Assessment return. Keep your dividend vouchers as records.
Tax-wrappers can remove dividend tax entirely. An ISA shelters dividends tax-free; a pension defers tax until you draw an income.
Dividends inside an ISA are completely tax-free and never need reporting. With a £20,000 annual allowance, moving dividend-paying holdings into an ISA (“Bed & ISA”) is the simplest way to cut dividend tax to zero.
Dividends inside a pension such as a SIPP grow free of dividend tax. You only pay Income Tax when you draw an income in retirement (with 25% normally tax-free). This shelters dividends during the years they compound.
Outside a wrapper, the £500 dividend allowance is used automatically each tax year. Couples can hold shares in the lower earner’s name to use two allowances and lower-band rates. This calculator shows the tax on dividends held outside an ISA or pension.
Foreign dividends are taxable in the UK and may also have foreign withholding tax. UK tax treaties and Foreign Tax Credit Relief usually prevent double taxation.
US dividends usually have 15% withholding tax if you have filed a W-8BEN with your broker. You report the dividend on your UK Self Assessment and claim Foreign Tax Credit Relief for the 15% already paid, so you are not taxed twice.
Withholding varies by country and treaty — some (France, Germany, Switzerland) withhold 25–35% but allow you to reclaim part down to the treaty rate. Foreign Tax Credit Relief offsets eligible foreign tax against your UK tax on that income.
Distributions from funds and ETFs may be taxed as dividends or as interest depending on the fund’s holdings. Check whether the fund has UK “reporting” status — non-reporting offshore funds are taxed as income at your marginal rate, not at dividend rates.
Step-by-step: how UK dividend tax is calculated
The three-step process
Step 1: Take off the £500 dividend allowance — this slice is tax-free. Step 2: Stack the remaining dividends on top of your other income to see which band they fall in. Step 3: Tax each part at the dividend rate for that band — 10.75% (basic), 35.75% (higher), or 39.35% (additional) for 2026/27. There is no gross-up or tax credit; the UK scrapped dividend imputation in 2016.
| Example | Calculation |
|---|---|
| £7,000 · £30,000 income (basic) | £6,500 taxed at 10.75% = £699 → Keep £6,301 |
| £7,000 · £80,000 income (higher) | £6,500 taxed at 35.75% = £2,324 → Keep £4,676 |
| £400 dividend · any income | Within the £500 allowance = £0 tax → No tax and nothing to report |
Dividend tax rate in each Income Tax band
The dividend rate you pay depends on your Income Tax band — dividends sit on top of your other income. The first £500 each year is tax-free.
| Your marginal rate | Dividend tax rate (2026/27) |
|---|---|
| First £500 (dividend allowance) | 0% — tax-free → Applies to everyone, every tax year |
| Basic-rate band (to £50,270) | 10.75% → The rate most investors pay — up from 8.75% on 6 April 2026 |
| Higher-rate band (to £125,140) | 35.75% → Once income passes £50,270 — up from 33.75% on 6 April 2026 |
| Additional-rate band (over £125,140) | 39.35% |
| Inside an ISA | 0% — always tax-free |
How ISAs and pensions remove dividend tax
Stocks & Shares ISA: 0% dividend tax
Dividends from shares and funds held inside a Stocks & Shares ISA are completely tax-free, with no reporting required. You can subscribe up to £20,000 across your ISAs each tax year. “Bed & ISA” — selling holdings and rebuying them inside an ISA — is the standard way to shelter a dividend portfolio over time.
Pensions (SIPP): tax-deferred
Dividends inside a pension such as a SIPP are free of dividend tax while invested. You pay Income Tax only when you draw an income in retirement, and 25% of your pot is normally tax-free. Pensions also attract tax relief on contributions, making them powerful for long-term dividend investing.
| Tax wrapper | Dividend tax treatment |
|---|---|
| Stocks & Shares ISA | 0% — tax-free, no reporting |
| SIPP / pension | 0% while invested; taxed on withdrawal |
How company directors are taxed on salary vs dividends
Salary vs dividends for directors
Many limited-company directors take a small salary plus dividends. The company pays Corporation Tax (19–25%) on profits first; the director then pays dividend tax (10.75/35.75/39.35%) on dividends drawn. There is no National Insurance on dividends, which is why this mix is common — but the company must have enough post-tax profit to declare the dividend legally.
| Scenario | How it is taxed |
|---|---|
| Salary | Income Tax + National Insurance (employee & employer) → Deductible for the company |
| Dividends | Corporation Tax, then 10.75/35.75/39.35% — no NI → Only from post-tax profit |
Director-shareholders should take dividends only from genuine retained profit and keep board-minute records. Speak to an accountant about the most tax-efficient salary/dividend split for your circumstances.
❓ Frequently askedFrequently asked questions
What is the dividend allowance in the UK?
The dividend allowance is the amount of dividend income you can receive tax-free each tax year — £500 in 2026/27. Dividends above it are taxed at 10.75%, 35.75%, or 39.35% depending on your Income Tax band. The UK abolished the old dividend tax credit (imputation) in April 2016.
Can I get a refund of dividend tax?
No — there is no dividend tax credit or refund in the UK system. However, dividends within your £500 allowance, within your £12,570 personal allowance, or held inside an ISA are taxed at 0%, so you may owe no dividend tax at all.
Are some dividends taxed differently?
All UK dividends are taxed the same way now — there are no credit-bearing dividend classes as there once were. The first £500 is tax-free; the rest is taxed at your dividend band rate — 10.75% (basic), 35.75% (higher), or 39.35% (additional) in 2026/27, after the basic and higher dividend rates rose 2 percentage points on 6 April 2026. Whether a payment is a dividend or interest (for example from some funds) does change the rate, so check your statement.
How are dividends in an ISA or pension taxed?
Dividends inside an ISA are completely tax-free. Dividends inside a pension (SIPP) are free of dividend tax while invested and taxed as income only when you draw on the pension. Both wrappers are far more tax-efficient than holding dividend shares in a taxable account.
How are company-director dividends taxed?
Company directors usually pay themselves a small salary plus dividends. The company pays Corporation Tax on profits first, then the director pays dividend tax (10.75/35.75/39.35%) with no National Insurance on the dividends. Dividends can only be paid from genuine post-tax profit.