What is the dividend tax allowance 2026/27?

The dividend allowance for 2026/27 is £500. The first £500 of dividend income you receive in the tax year is tax-free. This is unchanged from 2025/26. Before 2024/25, the dividend allowance was £1,000; before that it was £2,000. The reduction means many more investors and company director-shareholders now pay dividend tax.

What are the dividend tax rates in 2026/27?

From 6 April 2026, the dividend tax rates changed. Basic rate taxpayers pay 10.75% (up from 8.75%). Higher rate taxpayers pay 35.75% (up from 33.75%). Additional rate taxpayers pay 39.35% (unchanged). These are the rates on dividend income above the £500 dividend allowance. Source: Morningstar UK Tax Calendar 2026; Accace UK personal tax rates 2026/27.

Do I have to pay tax on dividends from ISAs?

No — dividends received within an ISA or pension are completely exempt from UK dividend tax, regardless of amount. This is one of the key advantages of holding investments inside a Stocks and Shares ISA. The £20,000 annual ISA allowance is available in 2026/27.

UK Dividend Tax 2026/27: £500 Allowance, New Rates 10.75%/35.75% Explained

Q: How are dividends taxed for company directors?

Company directors who pay themselves via dividends from their own limited company pay: 0% on the first £500 dividend allowance; 10.75% if they are basic-rate taxpayers; 35.75% if they are higher-rate taxpayers. Taking dividends combined with a salary up to the personal allowance (£12,570) and NI threshold is a common tax-efficient structure for directors, but the rising dividend rates are reducing the advantage.

UK Dividend Tax 2026/27: Rates, Allowance & How to Pay Less

Chandraketu Tripathi

Finance Editor, Kaeltripton

Published 4 Apr 2026

Last reviewed 11 May 2026

✓ Fact-checked

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UK dividend tax rates rose again in April 2026. The basic rate climbed from 8.75% to 10.75% and the higher rate from 33.75% to 35.75%. Combined with the £500 dividend allowance (down from £2,000 in 2022/23), investors and company directors face significantly higher dividend tax bills. 2026/27 Tax Year

Dividend Tax Rates 2026/27 — Confirmed

Tax Band	Dividend Tax Rate 2026/27	Rate in 2025/26	Change
Basic rate	10.75%	8.75%	+2%
Higher rate	35.75%	33.75%	+2%
Additional rate	39.35%	39.35%	Unchanged

Source: Morningstar UK Tax Calendar 2026 (January 2026); Accace UK personal tax rates 2026/27; DNS Accountants tax rates 2026/27. These rates apply to dividend income above the £500 dividend allowance from 6 April 2026.

Dividend Allowance — Historical Context

Tax Year	Dividend Allowance	Key Change
2022/23	£2,000	Baseline
2023/24	£1,000	Cut by 50%
2024/25	£500	Cut by 50% again
2025/26	£500	Unchanged
2026/27	£500	Unchanged

How Dividend Tax Is Calculated — Example

Example: You earn a £40,000 salary and receive £5,000 in dividends from your investment portfolio outside an ISA. Your salary uses the basic rate band. The dividends are stacked on top: First £500 of dividends: 0% (dividend allowance). Next £4,500 of dividends: 10.75% = £483.75 tax. Total dividend tax: £483.75. If your salary were £55,000, the dividends would fall in the higher rate band: First £500: 0%. Next £4,500: 35.75% = £1,608.75 tax. Moving these dividends into an ISA would save £483.75 or £1,608.75 per year respectively.

Dividend Tax for Company Directors

Salary + Dividend Structure	Income Tax	NI	Dividend Tax	Effective Tax
Salary to PA (£12,570) + dividends to basic rate limit	£0	£0 employee NI	10.75% above £500	Low — efficient but rising
Same structure as above in 2025/26	£0	£0	8.75% above £500	Was more efficient
Salary only (no dividends)	20% to £50,270	8% NI	N/A	Higher overall

The rising dividend tax rates are narrowing the gap between salary and dividend income for company directors. At 10.75% basic rate dividend tax, the tax advantage of dividends over salary is shrinking. Directors with complex situations should review their salary/dividend split with an accountant.

How to Reduce UK Dividend Tax

Strategy	How It Works	Annual Tax Saving
Use your ISA allowance	Hold dividend-paying shares inside an ISA — dividends are tax-free	Depends on portfolio — up to thousands per year
Use your dividend allowance	Ensure you receive up to £500/year in dividends outside your ISA	Up to £53.75 (basic) / £178.75 (higher rate)
Transfer shares to spouse	Use both spouses' allowances and basic rate bands	Up to £178.75 extra allowance annually
Hold in pension (SIPP)	Dividends inside a SIPP are tax-free — and contributions attract relief	Significant long-term benefit
Reinvest rather than receive	Accumulation funds reinvest dividends — delaying tax until disposal	Defers tax to CGT (potentially lower rates)

KAELTRIPTON VERDICT

UK dividend tax rates rose again in April 2026. Basic rate taxpayers now pay 10.75% (up from 8.75%), and higher rate payers pay 35.75% (up from 33.75%). The £500 dividend allowance is unchanged. For investors and company directors, maximising ISA and SIPP usage is more important than ever — dividends inside these wrappers are completely tax-free.

2026/27 Rates — Confirmed

Q: What is the dividend allowance 2026/27?

A: £500 — the first £500 of dividend income is tax-free. Down from £2,000 in 2022/23.

Q: What are the dividend tax rates 2026/27?

A: 10.75% basic rate (up from 8.75%), 35.75% higher rate (up from 33.75%), 39.35% additional rate (unchanged). Source: GOV.UK April 2026.

Q: Do ISA dividends get taxed?

A: No — dividends inside an ISA or pension are completely exempt from UK dividend tax.

Q: How are dividends taxed for company directors?

A: 10.75% if basic rate; 35.75% if higher rate. First £500 is free. ISA and SIPP sheltering is essential.

This article is for informational purposes only and does not constitute financial or tax advice. Always consult a qualified accountant or tax adviser for your personal circumstances. All rates and figures verified from GOV.UK and official sources, April 2026.

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UK Dividend Tax 2026/27: Rates, Allowance & How to Pay Less

Dividend Tax Rates 2026/27 — Confirmed

Dividend Allowance — Historical Context

How Dividend Tax Is Calculated — Example

Dividend Tax for Company Directors

How to Reduce UK Dividend Tax

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