TL;DR
From April 2026 the basic rate on dividend income rose from 8.75 percent to 10.75 percent, and the higher rate rose from 33.75 percent to 35.75 percent. The additional rate is unchanged at 39.35 percent. The £500 tax-free dividend allowance still applies.
Last reviewed: 14 May 2026
Key facts
- Basic rate on dividends: 10.75 percent (was 8.75 percent).
- Higher rate on dividends: 35.75 percent (was 33.75 percent).
- Additional rate on dividends: 39.35 percent, unchanged.
- Tax-free dividend allowance: still £500 for 2026/27.
- Dividends inside an ISA or pension are not affected.
What changed and when
The rates of Income Tax charged on dividend income increased from the start of the 2026/27 tax year on 6 April 2026. The basic rate moved up by 2 percentage points to 10.75 percent and the higher rate moved up by 2 percentage points to 35.75 percent. The additional rate stayed at 39.35 percent.
How dividend tax works
Dividends are paid from company profits to shareholders. The first £500 of dividend income in a tax year is covered by the dividend allowance and is not taxed. Above that, the rate depends on which Income Tax band the dividend income falls into once it is stacked on top of other income.
Who feels the rise
The change affects investors holding shares or funds outside tax-efficient accounts, and company directors who pay themselves through a small salary plus dividends. For a basic-rate taxpayer, every £1,000 of taxable dividend income now carries roughly £20 more tax than under the previous rate.
The wider 2026 picture
The dividend rise sits alongside a 2 percentage point increase on savings income and frozen Income Tax thresholds running to 2031. From April 2027 a separate change alters the order in which the Personal Allowance is applied, with earned income taking priority over dividends and other unearned income.
What investors can review
Common responses include making fuller use of the annual ISA allowance, which is £20,000 for 2026/27, and pension contributions, both of which shelter future dividends. The £500 dividend allowance and the order in which income is taxed also affect the final bill, so the position is worth checking against individual circumstances.
Reporting dividend income
Dividend income above the allowance is reported through Self Assessment, or in some cases collected through a tax code change. Keeping dividend vouchers and statements makes the annual return more straightforward.
Related guides
Frequently asked questions
What is the new basic rate of dividend tax?
From April 2026 the basic rate on dividend income is 10.75 percent, up from 8.75 percent.
Did the additional rate change?
No. The additional rate on dividend income remains 39.35 percent.
Is there still a tax-free dividend allowance?
Yes. The first £500 of dividend income in the 2026/27 tax year is covered by the dividend allowance and is not taxed.
Are dividends in an ISA affected?
No. Dividends from investments held inside an ISA or a pension are not subject to dividend tax, so the rate rise does not apply to them.
How much more tax will I pay?
It depends on your income and how much dividend income you receive above the £500 allowance. For a basic-rate taxpayer the rise adds roughly £20 of tax per £1,000 of taxable dividends.
