Question 1

What is the dividend allowance for 2026/27?

Accepted Answer

The dividend allowance is £500 for 2026/27. The first £500 of dividend income each tax year is completely tax-free, regardless of what tax band you're in. This was reduced from £1,000 in 2024/25 and £2,000 in 2022/23, and retained at £500 for 2026/27.

Question 2

What are the dividend tax rates for 2026/27?

Accepted Answer

After the £500 dividend allowance: 10.75% on dividends within the basic rate band (up to £50,270 total income), 35.75% on dividends within the higher rate band (£50,271–£125,140), and 39.35% on dividends above £125,140 total income. The basic and higher rates each rose by 2 percentage points from 2025/26 (8.75% and 33.75%).

Question 3

How does my salary affect the tax on my dividends?

Accepted Answer

Your salary (and other income) determines how much of each tax band is already used before dividends are stacked on top. For example, if your salary is £12,570 (equal to the personal allowance), you have the full basic rate band (£37,700) available for dividends at 10.75%. If your salary is £50,270 or above, all dividends fall into the 35.75% higher rate band.

Question 4

Is it better to take salary or dividends as a company director?

Accepted Answer

Dividends are taxed at lower rates (10.75% vs 20% basic rate income tax) and don't attract National Insurance contributions. However, salary is deductible against corporation tax at up to 25%, so the most tax-efficient split depends on your exact numbers. Use our Salary vs Dividends calculator for a precise comparison tailored to your situation.

Question 5

Do I pay National Insurance on dividends?

Accepted Answer

No. Dividends are not subject to National Insurance contributions (NICs), for either the employee or employer. This is one of the main tax advantages of taking dividends over salary if you're a company director.

Question 6

When do I pay dividend tax?

Accepted Answer

Dividend tax is paid through Self Assessment. You need to declare dividend income over £500 in a tax return. Tax is due by 31 January following the end of the tax year (i.e. 31 January 2028 for 2026/27 dividends).

Dividend Tax Calculator 2025/26

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