Dividend Tax Calculator 2026/27
Updated for the 2026/27tax year · Last updated
Enter your dividend income and any other income (salary, profits) to calculate dividend tax correctly. Dividends always sit on top of other income — the calculator applies the right rate based on which band your dividends fall into.
Dividends are payments made by limited companies to their shareholders from after-tax profits. For self-employed people operating through a limited company, taking a combination of a small salary and dividends is the standard tax-efficient extraction strategy — dividends are taxed at lower rates than income or self-employment profits, and they attract no National Insurance contributions.
The dividend allowance for 2026/27 is £500 — the amount of dividend income you can receive each year completely free of dividend tax (though it still counts as part of your income for determining which rate band your other dividends fall into). This allowance has been dramatically reduced over recent years: it was £5,000 in 2017/18, £2,000 in 2022/23, and £1,000 in 2023/24 before dropping to £500 from 2024/25 onwards.
Above the £500 allowance, dividends are taxed at rates that depend on which income tax band they fall into: 8.75% in the basic rate band, 33.75% in the higher rate band, and 39.35% in the additional rate band. These rates are lower than the equivalent income tax rates, which is why the limited company salary-plus-dividends model produces a tax saving compared to drawing the same amount purely as salary. To calculate accurately, always enter your other income alongside your dividends — since dividends sit on top, the rate depends on how much of the lower bands are already occupied.
Dividend tax
£1,706.25
£500 covered by dividend allowance
| Band | Rate | Tax |
|---|---|---|
| Basic Rate | 8.75% | £1,706.25 |
Dividend allowance: £500 · Basic rate: 8.75% · Higher rate: 33.75% · Additional rate: 39.35%
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How this calculator works
Dividend tax must always be calculated with reference to your total income, because dividends are treated as the top slice of income under HMRC’s ordering rules. The calculator applies the following sequence for 2026/27:
Step 1 — Personal allowance: The personal allowance (£12,570) is applied to your total income (other income plus dividends combined). If your income exceeds £100,000, the allowance tapers. Any remaining personal allowance after covering other income reduces the taxable portion of your dividends.
Step 2 — Other income fills the bands: Salary, self-employment profits, rental income, and other non-dividend income fills the income tax bands from the bottom up — using the personal allowance first, then the basic rate band (£12,571–£50,270), then the higher rate band (£50,271–£125,140). Dividends sit on top of this stack.
Step 3 — Dividend allowance: The first £500 of your total dividend income is covered by the dividend allowance. It is not tax-free in the sense that it does not exist for band purposes — it still occupies its position in the income stack — but no dividend tax is charged on it.
Step 4 — Dividend tax at band rate: Remaining taxable dividends are taxed at the rate applicable to the band in which they fall: 8.75% (basic), 33.75% (higher), or 39.35% (additional). If your dividends straddle a band boundary, the calculator splits them and applies the correct rate to each portion.
No NI on dividends: Unlike salary or self-employment profits, dividend income does not attract any National Insurance — neither employer nor employee. This is a key reason the salary-plus-dividends structure is tax-efficient for limited company directors operating outside IR35.