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What is dividend tax?
When a company you’re a shareholder of makes a profit, you might receive a dividend payment.
How does dividend tax work?
Dividends are a form of income and you may need to pay tax on the amount.
It’s your responsibility to declare and pay any taxes that might be due when you receive dividends on your shareholdings.
Each year, you get a dividends allowance to cover some of your investment earnings. Any dividends you receive over this allowance outside of a tax-efficient account like an ISA or pension, count towards your taxable income. This means you’ll have to pay dividends tax on them at a certain rate.
What is the dividend allowance?
The dividend allowance sets out how much you can earn in dividends each year before tax is due.
In the 2025/26 tax year, the dividend allowance is set at £500 - on top of your personal allowance. The standard Personal Allowance is £12,570 for 2025/26.*
Your personal allowance can also impact whether you pay tax on your dividends. For example, if your total income, including any dividends earnings, do not exceed the personal allowance, you won’t have to pay dividends tax.
It’s only if your total earnings are higher than your personal allowance and your dividends income is more than £500 that you’ll have to pay dividends tax.
*Find the latest dividend allowance information on the GOV.UK website, and Personal Allowance details on the GOV.UK website.
What are the dividend tax rates?
The dividend tax rate that applies once your dividends exceed the dividend allowance depends on your income tax band.
Dividend tax is charged at:
|
Income tax band |
2025/26 tax year |
2026/27 tax year |
|---|---|---|
|
Income tax band Basic rate |
2025/26 tax year 8.75% |
2026/27 tax year 10.75% |
|
Income tax band Higher rate |
2025/26 tax year 33.75% |
2026/27 tax year 35.75% |
|
Income tax band Additional rate |
2025/26 tax year 39.35% |
2026/27 tax year 39.35% |
You can find out about dividend rates on the GOV.UK website.
Want to know how much dividend tax you could pay? Let’s look at a few examples.
Example 1
Chris earns £12,700 from a part-time job and £300 in dividends. Their total income of £13,000 is over the tax-free personal allowance.
Chris won’t pay dividends tax as their dividend income in less than the dividend allowance of £500. They will however pay income tax at the basic rate on that £130 difference between salary and personal allowance.
Example 2
Alex’s total income is £35,000, including £5,000 in dividends.
Alex will pay income tax at the basic rate as their income is between £12,751 and £50,270. They’ll also pay the basic rate of dividends tax at 8.75% on their taxable dividends.
The tax-free dividend allowance is £500 so their taxable dividends are £4,500. So, Alex will pay £393.75 in dividends tax.
How do you pay tax on dividends?
When it comes to paying your dividends tax, the first thing you’ll need to do is report your dividend income. Here’s what you need to know.
Dividends less than £500
You usually won’t need to inform HMRC of any dividend income under £500.
If you do complete a self-assessment tax return, include your dividend income, even if it falls within the dividend allowance.
Dividends over £500 and up to £10,000
You’ll need to contact HMRC or include your dividend income on your self-assessment tax return on the GOV.UK website.
Dividends over £10,000
You’ll need to fill out a self-assessment tax return.
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