Dividend Tax Calculator

For 2025/26, the first £500 of dividends are tax-free (the dividend allowance). Above that, the rate depends on your income tax band: 8.75% for basic rate taxpayers (up to £50,270 total income), 33.75% for higher rate (£50,271–£125,140), and 39.35% for additional rate (above £125,140). Our calculator works this out automatically.

The dividend allowance for 2025/26 is £500. The first £500 of dividends you receive each year are tax-free regardless of your income tax band. This was reduced from £1,000 in 2024/25 and £2,000 in 2023/24.

Yes, if your dividend income exceeds the £500 allowance, you must report it to HMRC via Self Assessment. Even if no additional tax is due, you should declare dividends above the allowance. First time? Register for Self Assessment at gov.uk.

Most limited company directors take a low salary (up to the £12,570 personal allowance) and take additional income as dividends. For 2025/26: dividends are tax-free up to £500 (dividend allowance), then taxed at 8.75% within the basic rate band (combined income up to £50,270). This is often more tax-efficient than a high salary, but the advantage has reduced as dividend tax rates have increased.

For a sole director with no other income, the typical approach is: salary of £12,570 (uses the personal allowance — zero income tax, no NI for the company if only director), then take dividends up to £37,700 within the basic rate band at 8.75%. The first £500 of dividends are covered by the dividend allowance. Everyone's situation differs — consult a UK accountant for personalised advice.