Dividends are taxed more lightly than salary, but only up to a point, and the rates move. The 2025/26 tax year, which you file for by 31 January 2027, uses the older, lower rates; 2026/27 uses higher ones. This guide covers both, with a worked example, and explains when dividends belong on a Self Assessment return.
The 2025/26 figures
The 2025/26 dividend figures on HMRC's Income Tax rates and allowances page are:
| Item | 2025/26 |
|---|---|
| Dividend allowance | £500 |
| Basic rate dividend tax | 8.75% |
| Higher rate dividend tax | 33.75% |
| Additional rate dividend tax | 39.35% |
| Personal Allowance | £12,570 |
| Basic rate band | £37,700 |
The Personal Allowance starts to reduce when income goes above £100,000, by £1 for every £2 of income above it.
What changes in 2026/27
gov.uk's tax on dividends page shows the rates for 6 April 2026 to 5 April 2027 as 10.75% basic, 35.75% higher and 39.35% additional. The £500 allowance is unchanged. So the basic and higher rate dividend rates are each two percentage points higher than in 2025/26, and the additional rate does not move. If you pay yourself dividends from a company, that is the figure to model for the current year.
How dividends are taxed
Dividends are added to your other income to find your tax band, and you may pay different rates on different parts of them. Dividends within your Personal Allowance are not taxed, and dividends on shares held in an ISA are not taxed at all.
Worked example, 2025/26
You are a basic rate taxpayer with wages of £29,570 and receive £3,000 of dividends.
- Total income: £29,570 + £3,000 = £32,570.
- Less Personal Allowance of £12,570: £20,000 taxable.
- Wages: £17,000 of taxable wages at 20% = £3,400.
- Dividends: the first £500 is covered by the allowance at 0%.
- Remaining £2,500 of dividends at 8.75% = £218.75.
- Total tax: £3,618.75.
The same income in 2026/27 produces £268.75 on the £2,500 of dividends at 10.75%, which is £50 more.
When do you have to report dividends?
gov.uk says you need to report dividends to HMRC if your dividend payments are over both your unused Personal Allowance and your dividend allowance. In practice, that means one of two routes:
- You already file a return, and the dividends go on it.
- You register for Self Assessment and report the dividends on a return. See how to register, including the 5 October deadline.
If you take a salary and dividends from your own company, you will usually be in Self Assessment because the dividends are untaxed at source. The company issues dividend vouchers or board minutes; keep them, as they are the source documents for your return. The dividend vs salary calculator compares pay mixes using the current rates.
Dividends and payments on account
A large dividend increases your bill for the year, and if that raises your Self Assessment bill above the £1,000 or 80% thresholds, you will start making payments on account. A director who takes a big dividend in March can find that January's bill includes both the balancing payment and a first payment on account.
Where it goes on the return
Dividends from UK companies are reported in the UK dividends section of the main SA100. Dividends from overseas companies are reported on the foreign pages, which our SA106 foreign income guide covers. Keep a note of the date and net amount for each payment.
Checklist
- List every dividend with date, payer and amount for the tax year.
- Remember the allowance is £500, not £1,000.
- Model the 2026/27 rates if you take dividends now.
- Use the dividend tax calculator to test your figures.
- Diarise 31 January for the balance and the first payment on account.
How ac-co helps
ac-co drafts your SA100 from your bank, books and HMRC data, shows the tax computation including dividends and files only after you approve it. The rates above are for planning; the computation you review is the number that counts.