For 2026/27 you can take £500 of dividends tax-free, and dividends above that are taxed at 10.75% if they fall in your basic-rate band, 35.75% in the higher-rate band, and 39.35% above that. The two main rates rose by 2 percentage points from 6 April 2026, so dividends cost more this year than last — an important change for any director who pays themselves this way. Here's exactly how dividend tax is worked out, with examples, so you know what you'll actually pay.
Figures are for 2026/27 and sourced to gov.uk; they change at each Budget. General guidance, not personal advice.
The allowance and the rates
Everyone gets a £500 dividend allowance — the first £500 of dividend income each year is tax-free, on top of your personal allowance. Above £500, the rate depends on which Income Tax band the dividends fall into once they're stacked on top of your other income (gov.uk):
Your tax band
Dividend rate 2026/27
Was (2025/26)
Basic rate
10.75%
8.75%
Higher rate
35.75%
33.75%
Additional rate
39.35%
39.35%
The ordinary and upper rates each went up by 2 percentage points from 6 April 2026; the additional rate is unchanged (gov.uk technical note).
Two things trip people up, so it's worth being precise:
Dividends sit on top of your other income. Your salary and other earnings are counted first; dividends are treated as the top slice. So the rate you pay on dividends depends on how much of your basic-rate band (up to £50,270) is already used.
The allowance uses up part of your band, it doesn't add to it. The £500 is tax-free, but it still counts towards which band your other dividends fall into.
So a director with a small salary has more of the basic-rate band free for dividends at 10.75%; a director with a large salary will see dividends taxed at 35.75% sooner.
Worked examples
Example 1 — a basic-rate director. Salary £12,570 (uses the personal allowance) and £20,000 of dividends. The first £500 is tax-free; the remaining £19,500 sits within the basic-rate band, taxed at 10.75% ≈ £2,096. (Illustrative, 2026/27 rUK.)
Example 2 — into the higher-rate band. Salary £12,570 and £45,000 of dividends. After the £500 allowance, dividends fill the basic-rate band to £50,270 at 10.75%, and the portion above £50,270 is taxed at 35.75%. The jump at £50,270 is significant — which is why directors plan dividends around that threshold. (Illustrative.)
These show the pattern rather than your exact bill — your other income, the precise split and any other allowances all feed in.
How to keep dividend tax down — legitimately
Within the rules, directors commonly:
Use the £500 allowance every year.
Keep an eye on the £50,270 threshold, timing dividends so they don't needlessly tip into the 35.75% band.
Split shareholdings with a spouse/partner who is a genuine shareholder, so two dividend allowances and basic-rate bands are used (this must be a real arrangement, not a paper one).
Consider retaining profit in the company (taxed at 19%) rather than drawing dividends you don't need now.
Each depends on your situation, and the spouse/shareholder route in particular needs to be set up correctly — get it checked.
The 2026/27 rate rise makes the salary/dividend balance and the timing around the higher-rate threshold matter more than before — a couple of percentage points on a meaningful dividend adds up. Go Limited connects you with a partner accountant who'll plan your dividends and salary together so you pay what's due and no more. For the full picture on combining the two, see our guide on how to pay yourself from a limited company, or our accountancy page.
How much tax do I pay on dividends in 2026/27?
The first £500 is tax-free. Above that, dividends are taxed at 10.75% in the basic-rate band, 35.75% in the higher-rate band and 39.35% in the additional-rate band. The ordinary and upper rates rose 2 percentage points from 6 April 2026.
How much can I take in dividends tax-free?
£500 a year through the dividend allowance, on top of your personal allowance. If your salary doesn't use all of your £12,570 personal allowance, dividends can also use the remainder before any dividend tax applies.
Why did dividend tax go up in 2026?
The Government increased the two main dividend rates by 2 percentage points from 6 April 2026 — the ordinary rate from 8.75% to 10.75% and the upper rate from 33.75% to 35.75%. The additional rate stayed at 39.35%.
Do I pay National Insurance on dividends?
No — dividends carry no National Insurance. That's why they remain a tax-efficient way for directors to take income, even after the 2026 rate rise.
How do I pay the tax on my dividends?
Through Self Assessment. If you receive dividends above the allowance, you report them on your tax return and pay the tax due. Keep dividend vouchers as your record. An accountant can handle the return and make sure the figures are right.
For 2026/27 you can take £500 of dividends tax-free, and dividends above that are taxed at 10.75% if they fall in your basic-rate band, 35.75% in the higher-rate band, and 39.35% above that. The two main rates rose by 2 percentage points from 6 April 2026, so dividends cost more this year than last — an important change for any director who pays themselves this way. Here's exactly how dividend tax is worked out, with examples, so you know what you'll actually pay.
Figures are for 2026/27 and sourced to gov.uk; they change at each Budget. General guidance, not personal advice.
The allowance and the rates
Everyone gets a £500 dividend allowance — the first £500 of dividend income each year is tax-free, on top of your personal allowance. Above £500, the rate depends on which Income Tax band the dividends fall into once they're stacked on top of your other income (gov.uk):
Your tax band
Dividend rate 2026/27
Was (2025/26)
Basic rate
10.75%
8.75%
Higher rate
35.75%
33.75%
Additional rate
39.35%
39.35%
The ordinary and upper rates each went up by 2 percentage points from 6 April 2026; the additional rate is unchanged (gov.uk technical note).
Two things trip people up, so it's worth being precise:
Dividends sit on top of your other income. Your salary and other earnings are counted first; dividends are treated as the top slice. So the rate you pay on dividends depends on how much of your basic-rate band (up to £50,270) is already used.
The allowance uses up part of your band, it doesn't add to it. The £500 is tax-free, but it still counts towards which band your other dividends fall into.
So a director with a small salary has more of the basic-rate band free for dividends at 10.75%; a director with a large salary will see dividends taxed at 35.75% sooner.
Worked examples
Example 1 — a basic-rate director. Salary £12,570 (uses the personal allowance) and £20,000 of dividends. The first £500 is tax-free; the remaining £19,500 sits within the basic-rate band, taxed at 10.75% ≈ £2,096. (Illustrative, 2026/27 rUK.)
Example 2 — into the higher-rate band. Salary £12,570 and £45,000 of dividends. After the £500 allowance, dividends fill the basic-rate band to £50,270 at 10.75%, and the portion above £50,270 is taxed at 35.75%. The jump at £50,270 is significant — which is why directors plan dividends around that threshold. (Illustrative.)
These show the pattern rather than your exact bill — your other income, the precise split and any other allowances all feed in.
How to keep dividend tax down — legitimately
Within the rules, directors commonly:
Use the £500 allowance every year.
Keep an eye on the £50,270 threshold, timing dividends so they don't needlessly tip into the 35.75% band.
Split shareholdings with a spouse/partner who is a genuine shareholder, so two dividend allowances and basic-rate bands are used (this must be a real arrangement, not a paper one).
Consider retaining profit in the company (taxed at 19%) rather than drawing dividends you don't need now.
Each depends on your situation, and the spouse/shareholder route in particular needs to be set up correctly — get it checked.
The 2026/27 rate rise makes the salary/dividend balance and the timing around the higher-rate threshold matter more than before — a couple of percentage points on a meaningful dividend adds up. Go Limited connects you with a partner accountant who'll plan your dividends and salary together so you pay what's due and no more. For the full picture on combining the two, see our guide on how to pay yourself from a limited company, or our accountancy page.
How much tax do I pay on dividends in 2026/27?
The first £500 is tax-free. Above that, dividends are taxed at 10.75% in the basic-rate band, 35.75% in the higher-rate band and 39.35% in the additional-rate band. The ordinary and upper rates rose 2 percentage points from 6 April 2026.
How much can I take in dividends tax-free?
£500 a year through the dividend allowance, on top of your personal allowance. If your salary doesn't use all of your £12,570 personal allowance, dividends can also use the remainder before any dividend tax applies.
Why did dividend tax go up in 2026?
The Government increased the two main dividend rates by 2 percentage points from 6 April 2026 — the ordinary rate from 8.75% to 10.75% and the upper rate from 33.75% to 35.75%. The additional rate stayed at 39.35%.
Do I pay National Insurance on dividends?
No — dividends carry no National Insurance. That's why they remain a tax-efficient way for directors to take income, even after the 2026 rate rise.
How do I pay the tax on my dividends?
Through Self Assessment. If you receive dividends above the allowance, you report them on your tax return and pay the tax due. Keep dividend vouchers as your record. An accountant can handle the return and make sure the figures are right.
