Dividend income is taxed differently from employment income and other forms of taxable income, with separate allowances and tax rates applying depending on your overall income position.
You do not pay tax on dividends covered by your Personal Allowance (2026/27: £12,570), provided this has not already been used against other income. In addition, there is a separate Dividend Allowance of £500 per annum, meaning the first £500 of dividend income above your Personal Allowance is taxed at 0%. Any dividend income exceeding these allowances is subject to Income Tax.
For the 2026/27 tax year, dividend tax rates are:
- Basic Rate: 10.75%
- Higher Rate: 35.75%
- Additional Rate: 39.35%
To determine the applicable rate, dividend income is added to your other taxable income. As a result, dividend income may push part or all of your income into a higher tax band, meaning different portions of dividends can be taxed at different rates.
If your total dividend income is £10,000 or less, you may ask HMRC to collect the tax due through an adjustment to your PAYE tax code, allowing the tax to be collected gradually through your salary or pension. Alternatively, if you already complete a Self Assessment tax return, the dividend income can be reported there.
You do not normally need to notify HMRC if your dividend income falls entirely within the available Dividend Allowance and no additional tax is payable.
If you receive more than £10,000 of dividend income in a tax year, you will generally be required to complete a Self Assessment tax return. If you do not normally file a tax return, you should register with HMRC by 5 October following the end of the relevant tax year in which the dividend income was received.
