Dividend tax rates 2026/27
| Tax band | 2025/26 | 2026/27 |
|---|---|---|
| Basic rate | 8.75% | 10.75% |
| Higher rate | 33.75% | 35.75% |
| Additional rate | 39.35% | 39.35% |
The first £500 of dividends is covered by the dividend allowance. Dividends are taxed after salary and savings, so they sit on top of your other income when working out the band.
For company directors
A common mix is a salary of £12,570 plus dividends. The higher dividend rates from April 2026 make pension contributions from the company relatively more attractive.
FAQ
How much tax do I pay on £40,000 dividends?
With a £12,570 salary, about £4,821 in 2026/27: £500 is tax-free, £37,200 is taxed at 10.75% and the last £2,300 at 35.75%.
What is the dividend allowance for 2026/27?
£500.
Are dividends in an ISA taxed?
No. Dividends and gains inside a stocks and shares ISA or pension are tax-free.