Dividend Tax Calculator 2026/27
Dividends stack on top of your other income and have their own rates. Enter your salary and dividends to see the tax after the £500 allowance for 2026/27.
Last updated 4 July 2026 · Written and reviewed by Mustafa Bilgic
Dividend tax calculator
Tax on dividends stacked on your income, 2026/27.
Estimate for England, Wales & NI. Dividends in an ISA are tax-free. See GOV.UK.
How dividends are taxed in 2026/27
Dividends — payments a company makes to shareholders out of profit — have their own tax rules, separate from salary. The first £500 is tax-free under the dividend allowance, and above that dividends are taxed at rates that depend on your income tax band: 10.75% for basic-rate, 35.75% for higher-rate and 39.35% for additional-rate taxpayers in 2026/27. Crucially, no National Insurance is due on dividends, which is why they can be more efficient than salary for company owners.
A director taking a £12,570 salary and £40,000 dividends uses the £500 allowance, then pays 10.75% on the dividends up to £50,270 and 35.75% above — a dividend tax bill of about £4,821, with no NI on the dividends.
Dividends are the top slice
Dividends are treated as the top slice of your income. Your salary and other earnings are taxed first and fill up your personal allowance and tax bands; the dividends then sit on top and are taxed at the dividend rate for whichever band they land in. That's why a small salary leaves more of the basic-rate band free for lower-taxed dividends — the classic director structure our dividend tax guide explains in full.
| Band | Dividend rate 2026/27 |
|---|---|
| Dividend allowance (first £500) | 0% |
| Basic rate | 10.75% |
| Higher rate | 35.75% |
| Additional rate | 39.35% |
Rates apply above the £500 allowance. ISA dividends are tax-free.
Why directors still use dividends
Even with a £500 allowance and higher 2026/27 rates, dividends usually beat salary for extracting profit because they escape the 8% employee and 15% employer National Insurance that salary attracts. The trade-off is that dividends come from post-Corporation-Tax profit, so the company has already paid 19–25% before you receive them — model that first with our corporation tax calculator. The right salary/dividend split changes with the rates, so it's worth recalculating each tax year.
Shelter dividends in an ISA
Dividends from shares held inside a stocks & shares ISA are completely tax-free and don't count towards the £500 allowance or your income — one of the strongest reasons to use your £20,000 ISA allowance for dividend-paying investments. Outside an ISA, keep dividend vouchers and report anything over £500 (or over £10,000 via Self Assessment) to HMRC. To see where your salary sits against the £50,270 higher-rate line — which decides your dividend rate — use our take-home pay calculator.
Frequently asked questions
What is the dividend allowance for 2026/27?
The dividend allowance is £500. The first £500 of dividends is taxed at 0% regardless of your tax band. Dividends held inside an ISA are entirely tax-free and don't use the allowance.
What are the dividend tax rates for 2026/27?
Above the £500 allowance, dividends are taxed at 10.75% for basic-rate taxpayers, 35.75% for higher-rate and 39.35% for additional-rate. The rate depends on which income tax band the dividends fall into once stacked on your other income.
Do I pay National Insurance on dividends?
No. Dividends are not earnings, so no National Insurance is due. This is a major reason company directors often take a modest salary plus dividends rather than a large salary — though the company pays Corporation Tax on the profit first.
How do dividends stack with my salary?
Dividends are the top slice of your income. Your salary and other income are taxed first, then dividends are added on top and taxed at the dividend rate for whichever band they reach. A lower salary leaves more of the basic-rate band for lower-taxed dividends.
Do I need to tell HMRC about my dividends?
If your dividends are over £500 but under £10,000, you can ask HMRC to change your tax code or report through Self Assessment. Over £10,000 you must file a Self Assessment return. Dividends within an ISA never need reporting.