What is the dividend allowance in 2026/27?

£500. It was £1,000 in 2023/24 and halved to £500 from April 2024; unchanged for 2026/27. Dividends within the allowance are tax-free regardless of your other income.

What rate of tax do I pay on dividends?

Dividends above the allowance are taxed based on the income-tax band they fall into: 10.75% (basic), 35.75% (higher), 39.35% (additional) for 2026/27 onwards (+2pp on basic and higher per Autumn Budget 2025). These are UK-wide - Scotland does not set its own dividend rates.

How do dividends interact with my salary?

Your non-dividend income (salary, self-employed profit, etc.) is stacked first and uses Personal Allowance. Dividends sit on top, so the band that applies depends on your total income.

Are dividends from ISAs or pensions taxed?

No - dividends received inside an Individual Savings Account (ISA) or pension wrapper are entirely tax-free. This calculator is for unwrapped dividends from company shares held in your own name (e.g. limited-company director's distributions).

Does this cover Scottish taxpayers?

Yes - but note that dividend tax rates and bands are set UK-wide, not by Holyrood. Scottish income-tax bands only apply to non-dividend income.

What is the optimal director salary + dividend split in 2026/27?

£12,570 salary (covers Personal Allowance, zero income tax, minimal NI) + dividends up to the £50,270 higher-rate threshold = £37,200 of basic-rate dividends. Income tax on dividends 2026/27: £37,200 × 10.75% = £3,999 (£500 allowance covers first £500). Net take-home £45,271 from £50k+ of personal income, before Corporation Tax cost at company level.

Do I pay National Insurance on dividends?

No. Dividends are not earnings for NI purposes. This is the structural reason limited-company directors prefer dividend-heavy mixes - they carry only income tax (10.75% / 35.75% / 39.35%) versus salary which carries income tax PLUS employee NI (8% / 2%) PLUS employer NI (15% from April 2025, charged to the company).

When is a dividend taxed - declaration date or payment date?

Payment date for tax purposes. A dividend declared 30 March 2027 but paid 10 April 2027 falls in the 2027/28 tax year, not 2026/27. Interim dividends are recognised when paid; final dividends are recognised at the shareholder resolution date if unconditional. This timing flexibility is commonly used to smooth income across tax years.

How are foreign dividends taxed?

Same UK rates and same £500 allowance (shared across UK + foreign). Most countries withhold tax at source (US 15% under W-8BEN, France 12.8%, Germany 26.375%). UK Foreign Tax Credit Relief usually offsets the foreign tax up to your UK liability on the same income; excess is generally lost.

What is the Section 455 director loan trap?

If a close company (5 or fewer participators) lends to a director / shareholder and the loan is not repaid within 9 months + 1 day of year-end, the company pays 35.75% Section 455 tax on the outstanding amount. Refundable when repaid but cash-flow hit is real. Common error: taking £30k "on account" planning to vote a dividend later, then missing year-end - £10,125 of refundable tax tied up.

Tax on £40,000 Dividends UK 2026/27

Gross dividends: £40,000. After dividend tax you keep £37,105 — assuming no other taxable income (add salary below to stack).

Take-home pay

£37,105

7.2% effective tax rate

Monthly: £3,092
Weekly: £714
Daily: £143
Hourly: £19.03

Gross dividends	£40,000
Dividend tax	−£2,895
Net dividend	£37,105

Band breakdown

Band	Amount	Rate	Tax
Allowance	£500	0.00%	£0
Basic rate	£26,930	10.75%	£2,895

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Your salary in context

ONS · HMRC · CPI

Net dividend

After UK dividend tax you keep £37,105 from the £40,000 gross — an effective rate of 7.2%.
Dividend allowance

£500 of your dividends fall within the £500 tax-free dividend allowance.
Standalone dividend

With no other income, Personal Allowance (£12,570) absorbs the first chunk of your dividend before the allowance and bands apply.
Taxed at Basic rate

£26930 of dividends at 10.75% = £2,895.
Tax-free via ISA

Dividends held inside a Stocks & Shares ISA are entirely free of UK dividend tax. 2026/27 annual allowance: £20,000.

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Frequently asked questions

What is the dividend allowance in 2026/27?: £500. It was £1,000 in 2023/24 and halved to £500 from April 2024; unchanged for 2026/27. Dividends within the allowance are tax-free regardless of your other income.
What rate of tax do I pay on dividends?: Dividends above the allowance are taxed based on the income-tax band they fall into: 10.75% (basic), 35.75% (higher), 39.35% (additional) for 2026/27 onwards (+2pp on basic and higher per Autumn Budget 2025). These are UK-wide - Scotland does not set its own dividend rates.
How do dividends interact with my salary?: Your non-dividend income (salary, self-employed profit, etc.) is stacked first and uses Personal Allowance. Dividends sit on top, so the band that applies depends on your total income.
Are dividends from ISAs or pensions taxed?: No - dividends received inside an Individual Savings Account (ISA) or pension wrapper are entirely tax-free. This calculator is for unwrapped dividends from company shares held in your own name (e.g. limited-company director's distributions).
Does this cover Scottish taxpayers?: Yes - but note that dividend tax rates and bands are set UK-wide, not by Holyrood. Scottish income-tax bands only apply to non-dividend income.
What is the optimal director salary + dividend split in 2026/27?: £12,570 salary (covers Personal Allowance, zero income tax, minimal NI) + dividends up to the £50,270 higher-rate threshold = £37,200 of basic-rate dividends. Income tax on dividends 2026/27: £37,200 × 10.75% = £3,999 (£500 allowance covers first £500). Net take-home £45,271 from £50k+ of personal income, before Corporation Tax cost at company level.
Do I pay National Insurance on dividends?: No. Dividends are not earnings for NI purposes. This is the structural reason limited-company directors prefer dividend-heavy mixes - they carry only income tax (10.75% / 35.75% / 39.35%) versus salary which carries income tax PLUS employee NI (8% / 2%) PLUS employer NI (15% from April 2025, charged to the company).
When is a dividend taxed - declaration date or payment date?: Payment date for tax purposes. A dividend declared 30 March 2027 but paid 10 April 2027 falls in the 2027/28 tax year, not 2026/27. Interim dividends are recognised when paid; final dividends are recognised at the shareholder resolution date if unconditional. This timing flexibility is commonly used to smooth income across tax years.
How are foreign dividends taxed?: Same UK rates and same £500 allowance (shared across UK + foreign). Most countries withhold tax at source (US 15% under W-8BEN, France 12.8%, Germany 26.375%). UK Foreign Tax Credit Relief usually offsets the foreign tax up to your UK liability on the same income; excess is generally lost.
What is the Section 455 director loan trap?: If a close company (5 or fewer participators) lends to a director / shareholder and the loan is not repaid within 9 months + 1 day of year-end, the company pays 35.75% Section 455 tax on the outstanding amount. Refundable when repaid but cash-flow hit is real. Common error: taking £30k "on account" planning to vote a dividend later, then missing year-end - £10,125 of refundable tax tied up.