The UK Dividend Allowance Explained: £500 Tax-Free + 10.75% / 35.75% / 39.35% Rates (the current tax year)
The UK Dividend Allowance for the current tax year is £500 (HMRC), with dividends above the allowance taxed at 10.75% basic / 35.75% higher / 39.35% additional. ISA dividends and dividends within the Personal Allowance are tax-free. Here's the mechanic with an HMRC worked example.
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Open calculatorWhat the Dividend Allowance is
Dividends are payments a company makes to its shareholders out of profits. HMRC applies a separate set of rates to dividend income, distinct from Income Tax on wages, and gives every taxpayer a small tax-free allowance on top of the Personal Allowance.
You also get a dividend allowance of £500 each year (gov.uk). You only pay tax on any dividend income above the dividend allowance (gov.uk).
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The rates for the current tax year
This table shows the rates from 6 April 2026 to 5 April 2027 (gov.uk).
- Basic rate tax on dividends is 10.75% (gov.uk).
- Higher rate tax on dividends is 35.75% (gov.uk).
- Additional rate tax on dividends is 39.35% (gov.uk).
The band a dividend falls into is determined by adding the dividend income on top of other taxable income and reading off the resulting position within the Income Tax bands.
Two zero-rate zones
You do not pay tax on any dividend income that falls within your Personal Allowance (gov.uk). The Personal Allowance sits at £12,570 (gov.uk).
You do not pay tax on dividends from shares in an ISA (gov.uk). A Stocks and Shares ISA therefore takes dividends outside the tax calculation entirely, without eating into the £500 dividend allowance (gov.uk).
The HMRC worked example
HMRC publishes a worked example on its dividend tax page that walks through the arithmetic for a basic-rate taxpayer:
- You get £3,000 in dividends and earn £29,570 in wages in the 2026 to 2027 tax year (gov.uk).
- This gives you a total income of £32,570 (gov.uk).
- You have a Personal Allowance of £12,570 (gov.uk).
- Take this off your total income to leave a taxable income of £20,000 (gov.uk).
Applying the rates then produces three separate calculations:
- 20% tax on £17,000 of wages (gov.uk).
- No tax on £500 of dividends, because of the dividend allowance (gov.uk).
- 10.75% tax on £2,500 of dividends (gov.uk).
A note on scope
This page covers the published HMRC rules for the current tax year: the £500 dividend allowance (gov.uk), the 10.75% basic-rate dividend rate (gov.uk), the 35.75% higher-rate dividend rate (gov.uk), the 39.35% additional-rate dividend rate (gov.uk), the ISA exclusion (gov.uk), and the treatment of dividends inside the Personal Allowance (gov.uk).
UK Calculator provides information and tools, not regulated tax advice. Dividend planning interacts with pension contributions, salary-vs-dividend splits for company owners, ISA subscription limits, and the timing of dividend declarations across tax years — anyone in that territory should consult a chartered tax adviser or accountant.
Frequently asked questions
How much is the Dividend Allowance for the current tax year?
You also get a dividend allowance of £500 each year (gov.uk).
What rate applies to a basic-rate taxpayer's dividends above the allowance?
Basic rate tax on dividends is 10.75% (gov.uk).
What rate applies to a higher-rate taxpayer's dividends?
Higher rate tax on dividends is 35.75% (gov.uk).
What rate applies to an additional-rate taxpayer's dividends?
Additional rate tax on dividends is 39.35% (gov.uk).
Are ISA dividends taxable?
No. You do not pay tax on dividends from shares in an ISA (gov.uk).
Are dividends inside the Personal Allowance taxable?
No. You do not pay tax on any dividend income that falls within your Personal Allowance (gov.uk).
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