Dividend Tax
UK tax glossary · Last reviewed: April 2026
Dividend income is taxed at preferential rates compared to employment income: 8.75% (basic rate), 33.75% (higher rate), or 39.35% (additional rate) in 2026/27. The first £500 of dividend income is covered by the Dividend Allowance and is tax-free.
Dividends are stacked on top of other income when calculating which rate band applies. A basic-rate taxpayer with a salary of £40,000 who receives £15,000 in dividends will have some dividends taxed at the higher rate because together the income exceeds £50,270.
Dividend tax is reported via Self Assessment if your dividends exceed £500. Tax is not deducted at source on dividends from UK companies. HMRC adjusts tax codes for relatively small dividend amounts, but larger amounts require a Self Assessment return.
Worked example
Salary: £45,000. Dividends: £8,000. Total: £53,000. Dividend Allowance: £500. Basic-rate band remaining after salary: £50,270 − £45,000 = £5,270. Dividends in basic-rate band: £5,270 × 8.75% = £461. Dividends in higher-rate band: £2,230 × 33.75% = £753. Total dividend tax: £1,214.
Common questions
Are dividends from an ISA subject to dividend tax?
No. Dividends paid on shares held within an ISA are completely tax-free and do not use any of the Dividend Allowance.
When do I pay dividend tax — through PAYE or Self Assessment?
Dividend tax is never collected through PAYE directly. For small amounts, HMRC adjusts your tax code. For dividends above £10,000, you must complete a Self Assessment return and pay the tax by 31 January.
Related resources
TaxHelper provides general information based on published HMRC rates and guidance. It is not regulated financial or tax advice. For decisions involving significant sums, complex circumstances, or if you are unsure, speak to a qualified accountant or HMRC directly.