Question 1

How are dividends taxed in the UK?

Accepted Answer

Dividends are taxed on top of your other income. The first £500 of dividends is tax-free under the dividend allowance, and any unused Personal Allowance covers them first too. Above that, dividends are taxed at the dividend rates for whichever income tax band they fall into.

Question 2

What are the dividend tax rates?

Accepted Answer

For the 2026/27 tax year the dividend rates are 8.75% in the basic-rate band, 33.75% in the higher-rate band and 39.35% in the additional-rate band. The band a dividend falls into depends on your total income for the year.

Question 3

How much is the dividend allowance?

Accepted Answer

The dividend allowance is £500 for the 2026/27 tax year. It is the amount of dividend income you can receive tax-free each year, on top of your Personal Allowance. It has fallen from £2,000 in recent years.

Question 4

Do dividends inside an ISA or pension count?

Accepted Answer

No. Dividends from shares and funds held inside a stocks & shares ISA or a pension are completely tax-free and do not use up your dividend allowance. Only dividends held outside a tax wrapper are taxable — so this calculator is for unwrapped holdings.

Question 5

Do dividends push me into a higher tax band?

Accepted Answer

Dividends sit on top of your other income, so they can fall into a higher band even though they are taxed at the lower dividend rates. They can also reduce your Personal Allowance if your total income goes above £100,000. This tool models both effects.

How much tax will you pay on your dividends?

How it breaks down

Shelter your dividends from tax

Common questions