Dividend Allowance 2026/27: UK Dividend Tax Rates and How to Pay

The dividend allowance hasn't changed for 2026/27, but the tax on dividends above it has. From 6 April 2026, basic rate taxpayers pay 10.75% on dividends over the allowance, up from 8.75%, and higher rate taxpayers pay 35.75%, up from 33.75%.

For a company director paying themselves mainly in dividends, that's an extra GBP 2 of tax on every GBP 100 above the allowance. For investors with a few thousand pounds of dividends outside an ISA, it's a smaller change, but one that adds up over several years.

This guide covers how the allowance works, the 2026/27 rates, how to report and pay the tax, and the legitimate ways to reduce it. For the wider picture on corporation tax, VAT and National Insurance, see our guide to the UK business tax system.

What Is the Dividend Allowance?

The dividend allowance is the amount of dividend income you can receive each tax year without paying tax on it. Each individual gets one allowance, however many companies they hold shares in, and it covers dividends from a personal investment portfolio and from your own company alike.

Dividends covered by the allowance still count towards your total income. That matters because they can push other income into a higher tax band.

You can't carry an unused allowance forward to the next tax year.

Dividend Allowance and Tax Rates for 2026/27

According to HMRC's guidance on tax on dividends, the dividend allowance is GBP 500, and dividends above it are taxed at these rates from 6 April 2026 to 5 April 2027:

To work out your band, add your dividends to your other income. You may pay tax on dividends at more than one rate.

Your Personal Allowance goes down by GBP 1 for every GBP 2 of adjusted net income above GBP 100,000, and disappears completely at GBP 125,140, according to HMRC's Income Tax rates page.

Do Scottish Taxpayers Pay Different Dividend Rates?

No. Scotland sets its own income tax bands for salary and other non-savings income, but dividends are taxed at the UK-wide dividend rates above.

How Much Tax Will You Pay? Two Examples

Example 1: Dividends Are Your Only Income

You receive GBP 13,000 in dividends in 2026/27 and have no other income.

• Your Personal Allowance covers the first GBP 12,570.
• That leaves GBP 430 of taxable dividends, which the GBP 500 dividend allowance covers.
• You pay no tax.

With no other income, you can receive up to GBP 13,070 in dividends tax-free.

Example 2: Salary Plus Dividends

You earn a salary of GBP 30,000 and receive GBP 6,000 in dividends in 2026/27.

1. Your salary uses up your Personal Allowance, so none of it is left for the dividends.
2. Your total income is GBP 36,000, so all your dividends fall in the basic rate band.
3. The first GBP 500 of dividends is covered by the dividend allowance.
4. The remaining GBP 5,500 is taxed at 10.75%: GBP 591.25.

In 2025/26, the same dividends would have cost GBP 481.25 in tax, at 8.75%. HMRC has an online tool to estimate the tax on your dividends and savings interest.

How to Report and Pay Tax on Dividends

You don't need to tell HMRC about dividends that fall within your dividend allowance. Above that, how you report depends on how much you received, according to HMRC's reporting guidance:

For dividends received in 2026/27, the online filing and payment deadline is 31 January 2028.

If you file Self Assessment and owe more than a small amount, HMRC may also ask for payments on account towards the next year's bill, due on 31 January and 31 July.

Penalties for Filing or Paying Late

HMRC's penalty rules for a late Self Assessment return are:

• GBP 100 as soon as the return is late
• After 3 months, GBP 10 a day for up to 90 days, a maximum of GBP 900
• After 6 months, a further 5% of the tax due or GBP 300, whichever is greater
• After 12 months, another 5% or GBP 300, whichever is greater

Paying late adds penalties of 5% of the unpaid tax at 30 days, 6 months and 12 months, plus interest.

Dividends for Company Directors

If you own a limited company, dividends are paid out of profits that have already been taxed through corporation tax. According to GOV.UK's guidance on taking money out of a limited company, a company must not pay out more in dividends than its available profits from current and previous financial years. For each dividend, the directors should declare it at a meeting, keep minutes and give each shareholder a dividend voucher.

Dividends don't attract National Insurance, which is one reason many directors combine a modest salary with dividends. The right balance depends on your company's profits and on whether you want to build National Insurance credits for the State Pension, so it's worth agreeing with your accountant before the tax year starts. Our guide to how much dividend you can pay yourself tax-free works through the salary and dividend numbers. The 2026 rate rise narrows the gap between salary and dividends for basic rate taxpayers, so if you set your mix a few years ago, check it again.

Ways to Reduce Tax on Dividends

Hold Investments in an ISA

Dividends from shares held in an ISA are tax-free and don't use up your dividend allowance. For 2026/27, you can put up to GBP 20,000 into ISAs, according to HMRC's ISA guidance.

Use Both Partners' Allowances

Each person has their own GBP 500 dividend allowance and Personal Allowance. According to GOV.UK, you don't pay Capital Gains Tax on assets you give to your spouse or civil partner (unless you were separated for the whole tax year), so moving some shares to a partner who pays less tax can lower the household's bill.

The transfer has to be a genuine, outright gift. If you only pass on the right to the dividends while keeping control of the shares, HMRC can tax the income as yours under the settlements rules. This is especially relevant for shares in your own company, so take advice first.

Pay Into a Pension

Personal pension contributions get tax relief. In a relief-at-source scheme, your provider claims the first 20%, and if you pay tax at 40% you can claim an extra 20% through Self Assessment on contributions up to the amount of income taxed at that rate, according to GOV.UK's guidance on pension tax relief. If your dividends push you into the higher rate band, ask your accountant how contributions affect the rate you pay on them.

Company directors can also have their company pay into a pension. Employer contributions are generally deductible for corporation tax and aren't taxed on you as income.

Consider Capital Gains Instead of Dividends

For investors, growth from selling shares is taxed under Capital Gains Tax, not dividend tax. (Companies are taxed differently on their own gains: see our guide on whether companies pay capital gains tax.) For gains from 6 April 2026, HMRC's Capital Gains Tax rates are 18% within the basic rate band and 24% above it, with an annual exempt amount of GBP 3,000.

At the higher rate, 24% is well below the 35.75% dividend rate. At the basic rate, though, the 18% CGT rate is higher than the 10.75% dividend rate, so switching from dividend-paying shares to growth shares only helps once your gains and dividends push you into the higher band.

What If You Receive Dividends From Overseas?

If you're a UK resident, dividends from foreign companies are taxed at the same UK dividend rates and count towards the same GBP 500 allowance. You must report them on the foreign income section of your Self Assessment return, even if tax was already taken off abroad.

Where the other country withheld tax, you may be able to claim Foreign Tax Credit Relief to reduce your UK tax. The amount you can claim depends on the double taxation agreement between the UK and that country.

If You Live Outside the UK

Non-UK residents are taxed differently on UK dividends. They don't get the same treatment as residents, and the country they live in may tax the dividends too. If you've recently left the UK, the temporary non-residence rules can bring dividends back into UK tax if you return within five years. Take advice before taking large dividends around a move.

How Statrys Can Help

Statrys doesn't give UK tax advice. If you run a company registered in Hong Kong, Singapore or the BVI with UK shareholders or customers, a Statrys Hong Kong business account lets you hold GBP and send GBP payments, including dividends to UK shareholders. Account holders can also request UK local currency account details to receive GBP like a local business. Statrys doesn't currently onboard US clients.

If you're setting up a company in Asia, see our Hong Kong company registration service.