UK Dividend Allowance (2026/27)
UK Dividend Allowance for 2026/27: £500 tax-free, then 10.75%, 35.75% and 39.35%. Cut from £1,000 in 2023/24 to £500 from 2024/25.
The first £500 of dividend income each tax year is taxed at 0% under the Dividend Allowance (ITA 2007 s.13A). Above that, dividends are taxed at 10.75% (basic), 35.75% (higher) or 39.35% (additional). The basic and higher rates rose by 2 percentage points from 6 April 2026. The allowance has been cut from £5,000 in 2016/17 to £500 from 2024/25.
Dividend Allowance history
| Tax year | Allowance |
|---|---|
| 2016/17 to 2017/18 | £5,000 |
| 2018/19 to 2022/23 | £2,000 |
| 2023/24 | £1,000 |
| 2024/25 onwards | £500 |
Dividend tax rates 2026/27
The income ranges below assume dividends are your only income and you get the full Personal Allowance. Other income uses the bands first, and above £100,000 the Personal Allowance is withdrawn by £1 for every £2.
| Tax band | Total income (dividends only) | Dividend rate |
|---|---|---|
| Personal Allowance + £500 Dividend Allowance | First £13,070 | 0% |
| Basic rate | £13,071 to £50,270 | 10.75% |
| Higher rate | £50,271 to £125,140 | 35.75% |
| Additional rate | Above £125,140 | 39.35% |
Related
Frequently asked questions
What is the UK Dividend Allowance for 2026/27?
The Dividend Allowance for 2026/27 is £500: the first £500 of dividend income in the tax year is taxed at 0%, whichever band the rest of your income falls in. Above that, dividends are taxed at 10.75% (basic rate), 35.75% (higher rate) or 39.35% (additional rate). The allowance was £5,000 in 2016/17 and 2017/18, £2,000 from 2018/19 to 2022/23, £1,000 in 2023/24, and has been £500 since 2024/25.
How are dividends taxed in the UK?
Dividends are treated as the top slice of your income. Any Personal Allowance not used by other income covers them first, then the £500 Dividend Allowance, and the rest is taxed at the dividend rates (10.75% basic, 35.75% higher, 39.35% additional). Dividends allowed by the allowance still count towards your tax bands. Dividends are not subject to National Insurance.
Does the £500 allowance use up my Personal Allowance?
No - they are separate. Someone whose only income is £12,570 of dividends uses their Personal Allowance and pays no tax. The next £500 is covered by the Dividend Allowance. Above £13,070 of dividend-only income, basic rate dividend tax (10.75%) starts to apply. Above £100,000 of income the Personal Allowance is gradually withdrawn.
Why are dividend rates lower than employment income rates?
Dividends are paid from profits that have already borne Corporation Tax (19% to 25%, with marginal relief between). Taking both taxes together, £1 of profit paid as a basic rate dividend bears about 27.71% at the small profits rate or 33.06% at the main rate. A salary paid instead is deductible for Corporation Tax but bears 20% Income Tax, 8% employee NI and 15% employer NI for a basic rate taxpayer.
How does the contractor "salary + dividend mix" use this?
Limited company contractors outside IR35 often take a £12,570 director salary (no Income Tax, with employer NI at 15% on the part above the £5,000 Secondary Threshold unless the Employment Allowance applies), then take post-Corporation Tax profits as dividends: the first £500 at 0% and the next £37,200 at 10.75% before the higher rate. The full mechanics are modelled in the /contractor-calculator outside IR35 mode.