Dividend tax calculator
What you keep from your dividends once your salary has decided which band they fall into.
- Covered by allowances
- £0
- Basic rate, 10.75%
- £0
- Higher rate, 35.75%
- £0
- Additional rate, 39.35%
- £0
- Total dividend tax
- £0
Dividends sit on top of everything else
This is the rule that makes dividend tax feel unpredictable. Dividends are treated as the final slice of your income, so your salary is what decides which band they fall into. The same £20,000 of dividends might be taxed almost entirely at 10.75% next to a small director's salary, or entirely at 35.75% next to a £60,000 one.
Your personal allowance is set against your other income first, and anything left over covers dividends. On top of that sits a £500 dividend allowance taxed at 0%. It is not extra tax-free income though: it uses up part of your basic rate band on the way through, which is why the sums do not reduce to simple subtraction.
The rates rose in April 2026
The basic rate went from 8.75% to 10.75% and the higher rate from 33.75% to 35.75%, both announced in the 2025 Autumn Budget. The additional rate was left at 39.35%. For a director taking £50,000 in dividends on a £12,570 salary that is roughly £750 a year more than the same arrangement cost before April.
Same rates everywhere in the UK
Dividend tax is not devolved. A Scottish taxpayer pays Scottish rates on salary and UK-wide rates on dividends, against UK-wide bands. It is one of the few places where living in Scotland makes no difference to the bill, and it catches out people who assume the whole return follows one set of rates.
What this does not cover
This is the personal tax on dividends you have received. It does not model the corporation tax your company pays before the dividends can be declared, dividends held inside an ISA or pension, which are free of this tax entirely, or the question of whether the company has distributable profits to pay them from. For the salary-versus-dividends decision you need both halves.
Common questions
- Did dividend tax go up this year?
- Yes. From 6 April 2026 the basic rate rose from 8.75% to 10.75% and the higher rate from 33.75% to 35.75%. The additional rate stayed at 39.35%. That is an extra £20 of tax for every £1,000 of dividend income in the basic and higher bands.
- I live in Scotland. Do I pay Scottish rates on dividends?
- No. Dividend tax is UK-wide, charged at the same rates against the same bands wherever in the UK you live. Only your salary and other non-savings income follow the Scottish rates.
- Why does my salary change the tax on my dividends?
- Dividends are treated as the top slice of your income, so your salary decides which band they land in. The same £20,000 of dividends costs far more alongside a £60,000 salary than alongside a £12,570 one.
- Is the £500 dividend allowance tax-free income on top of everything else?
- Not quite. It is taxed at 0% rather than exempt, and it still uses up part of your basic rate band as it passes through. The effect is small but it is why the arithmetic does not always match a simple subtraction.
- Is salary or dividends better for a company director?
- Usually a small salary up to the National Insurance threshold, then dividends, because dividends avoid National Insurance entirely. The gap narrowed with the April 2026 rise, and corporation tax is paid before dividends are declared, so the full comparison needs both sides. This tool covers the personal side only.