UK dividend tax calculator 2026 to 2027

Dividends are taxed as the top slice of your income. That single rule explains almost every surprising result.

1. Your personal allowance of £12,570 is set against your income, salary first.
2. The first £500 of dividends above that is taxed at 0%.
3. Everything above is taxed at the rate for the band it falls in, stacked on top of your other income.

The dividend allowance is not a true allowance. It is a nil rate band: the £500 still uses up part of your basic rate band rather than sitting outside it. So it reduces the tax you pay but does not create extra room lower down.

Because dividends sit on top, a modest salary increase can push dividends that were taxed at 10.75% into 35.75%. The salary rise is taxed at 20%, but its real cost includes 25 percentage points more tax on the dividends it displaced.

A director on a £12,570 salary taking £50,000 of dividends, with no other income.

• Salary of £12,570 is covered exactly by the personal allowance. No income tax, though a little employee National Insurance is due above £12,570 depending on how it is paid through the year.
• First £500 of dividends: taxed at 0%, but it consumes £500 of the basic rate band.
• Basic rate band remaining: £50,270 - £12,570 - £500 = £37,200 taxed at 10.75% = £3,999
• Remaining £12,300 at 35.75% = £4,397
• Total dividend tax: about £8,396

On the 2025/26 rates the same extraction would have cost about £7,406. The April 2026 change costs this director roughly £990 a year, and remember this is on top of corporation tax the company already paid on the same profit.

Source: GOV.UK: tax on dividends, checked 2026-08-08.

The Autumn Budget 2025 raised the ordinary and upper dividend rates by two percentage points each from 6 April 2026. The additional rate was left alone.

One consequence is easy to miss. The section 455 charge on an overdrawn director loan is defined as the dividend upper rate, so it rose at the same time, from 33.75% to 35.75%. The rate is fixed by the tax year the loan was made in, not the year end it is assessed against, so loans drawn before 6 April 2026 keep the old rate.

Source: GOV.UK: changes to tax rates for property, savings and dividend income, checked 2026-08-08.

• The personal allowance taper is not in the simple version. Above £100,000 of income the allowance is withdrawn at £1 for every £2, creating a 60% effective band on salary and a correspondingly higher effective rate on the dividends that pushed you there.
• Scotland. Scotland sets its own rates and bands on salary. Dividend rates are the same across the UK, but the point at which your dividends tip into the upper rate depends on the salary bands that apply to you, so a Scottish taxpayer can get a different answer from the same inputs.
• Dividends must be legal to be dividends. They can only be paid from distributable reserves, need a board minute and a dividend voucher, and a payment that fails those tests can be recharacterised as salary or a director's loan, with entirely different tax.
• This ignores corporation tax already paid. The company paid 19% to 25% on the profit before any dividend was possible. Judging dividend tax alone understates the total.
• Other income sits underneath. Rental profits, interest above the savings allowance and a second employment all fill bands before your dividends land.