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Dividend tax explained
What is dividend tax?
Dividend tax is the tax on dividends you receive when a company you’re a shareholder of makes a profit and pays some of that profit out to you. Dividends count as a type of income, so you may need to pay tax on them depending on your total dividend income
How does dividend tax work?
Dividend income is added to the rest of your taxable income for the tax year. You get a dividend allowance that lets you earn a certain amount of dividend income tax‑free. Any dividends above this allowance are taxed at a rate that depends on your income tax band.
Your dividend tax rate depends on your overall income, so it can change if you move into a different tax band.
What is the dividend allowance?
The dividend allowance sets out the amount of dividend income you can receive before paying tax.
The dividend allowance is now £500 - this is on top of your personal allowance.
The standard Personal Allowance is £12,570 at the moment.
How much dividend income is tax‑free?
If your total income (including dividends) stays within your personal allowance, you won’t pay dividend tax.
You’ll only pay dividend tax if:
- what you earn goes over your Personal Allowance
- your dividend income is more than £500.
Always check the latest allowance on the GOV.UK website.
What are the dividend tax rates?
Once your dividend income goes over the dividend allowance, you’ll pay tax based on your income tax band. Here’s how it works.
|
Income tax band |
Dividend tax rate 2025/2026 |
Dividend tax rate 2026/2027 |
|---|---|---|
|
Income tax band Basic rate (income £12,571 to £50,270) |
Dividend tax rate 2025/2026 8.75% |
Dividend tax rate 2026/2027 10.75% |
|
Income tax band Higher rate (income £50,271 to £125,140) |
Dividend tax rate 2025/2026 33.75% |
Dividend tax rate 2026/2027 35.75% |
|
Income tax band Additional rate (income over £125,140) |
Dividend tax rate 2025/2026 39.35% |
Dividend tax rate 2026/2027 39.35% |
Even if your employment income is taxed using Scotland’s 6 band structure, your dividends still use the standard UK tax bands. For the latest rates, always check the GOV.UK website.
Dividend tax rates (2025/2026 and 2026/2027)
How much dividend tax will you pay?
Below are 2 examples for the 2025/2026 tax year to show how much tax you pay on dividends, depending on income, allowance and tax band.
How do you pay tax on dividends?
How you report and pay dividend tax depends on the amount you’ve earned.
If your dividends are under £500
Usually there’s no need to inform HMRC.
If you already complete a self‑assessment tax return, you should still include the dividend income.
If your dividends are £500 to £10,000
Contact HMRC or include the dividend income on your self‑assessment tax return.
If your dividends are over £10,000
You must complete a self‑assessment tax return.
You can find more details on how to pay dividend tax on the HMRC website.
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