Dividend tax rates for 2026/27
From 6 April 2026 the ordinary and upper dividend rates each went up by 2 percentage points. The additional rate stays the same. The first £500 of dividends is tax-free under the dividend allowance in both years.
| Your income falls in the | 2025/26 | 2026/27 |
|---|---|---|
| Basic rate band (ordinary rate) | 8.75% | 10.75% |
| Higher rate band (upper rate) | 33.75% | 35.75% |
| Over £125,140 (additional rate) | 39.35% | 39.35% |
Dividends are taxed last, on top of your salary and savings. The £500 allowance is taxed at 0% but still uses up £500 of your band, so it can push later dividends into the upper rate. Dividend tax rates explained.
Salary or dividends: what directors take
A salary costs the company 15% employer NI on pay over £5,000 a year, but it comes off the profit before corporation tax. Dividends are paid from profit after corporation tax of 19% to 25%. For most one-director companies, a salary of £12,570 leaves the most: it’s covered by your personal allowance, and the corporation tax it saves is more than the employer NI. Any salary from £6,708 also earns a year towards your state pension.
Two things change the answer. Between £100,000 and £125,140 of income you lose £1 of personal allowance for every £2 over £100,000, and a £5,000 salary often wins. If someone else is paid over £5,000, the company can claim Employment Allowance, and a higher salary can win. At very high profits a large salary can also edge ahead, so the calculator tries every salary in £10 steps too. Salary or dividends in full.
If you live in Scotland
Scottish rates apply to your salary, pensions, rent and self-employed profit. Savings and dividends are taxed at UK rates, in the UK bands, sitting on top of your salary. So the dividend rates above are the same in Scotland; only the tax on your other income changes. How dividends are taxed in Scotland.