Dividend tax 2026/27: the new 10.75% and 35.75% rates explained
Short answer
Since 6 April 2026, dividends above the £500 allowance are taxed at 10.75% (basic rate), 35.75% (higher rate) and 39.35% (additional rate), 2 points higher than last year at the first two bands. A director taking £37,700 of dividends on top of a £12,570 salary pays about £744 more a year.
Since 6 April 2026, dividends are taxed 2 percentage points higher at the basic and higher rates. The additional rate is unchanged. If you own shares outside an ISA, or pay yourself through your own limited company, this is already affecting the 2026/27 tax year you’re in now.
Dividend tax rates 2026/27
| Band (total income) | 2025/26 | 2026/27 |
|---|---|---|
| Basic rate (£12,571 – £50,270) | 8.75% | 10.75% |
| Higher rate (£50,271 – £125,140) | 33.75% | 35.75% |
| Additional rate (over £125,140) | 39.35% | 39.35% |
The dividend allowance stays at £500: the first £500 of dividends each year is taxed at 0%. Dividends inside an ISA or pension are never taxed. Rates apply across the whole UK, including Scotland.
HMRC’s own example
You earn £29,570 in wages and £3,000 in dividends. Total income £32,570, minus the £12,570 Personal Allowance, leaves £20,000 taxable, all in the basic rate band:
- 20% on £17,000 of wages
- 0% on the first £500 of dividends (the allowance)
- 10.75% on the remaining £2,500 of dividends = £268.75 (it was £218.75 last year)
What it costs a company director
A common set-up: £12,570 salary plus £37,700 in dividends, keeping total income at the top of the basic rate band.
- Salary: covered by the Personal Allowance, no Income Tax
- Dividends: £500 at 0%, then £37,200 × 10.75% = £3,999
- Last year the same dividends cost £3,255, so the rise is £744 a year
A director taking £50,000 of dividends above the basic rate band pays £1,000 more than last year on that slice alone (£50,000 × 2%).
Salary vs dividends: does the balance change?
Dividends still avoid National Insurance, so for most owner-managers they remain cheaper than salary, just less so. Three things now matter more:
- Use the £500 allowance every year, and a spouse’s allowance and basic-rate band if they genuinely own shares.
- Employer pension contributions come out of company profit before Corporation Tax and carry no dividend tax at all.
- Don’t drift into the higher band by accident. Crossing £50,270 moves dividends from 10.75% to 35.75%, and above £100,000 the Personal Allowance starts disappearing too.
How you pay it
- Over £10,000 in dividends: you must file a Self Assessment return. For 2026/27 the online deadline is 31 January 2028.
- £500 to £10,000: tell HMRC. They can collect it through your tax code if you’re employed or get a pension, or you can file a return.
- Under £500: nothing to pay or report.
What’s coming next
From April 2027 the same 2-point rise hits savings interest and rental income. If you have all three, the order your income is taxed in also changes that year.
Sources: GOV.UK: Tax on dividends; HMRC policy paper. General information, not tax advice.
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