Dividend Tax Calculator UK — How Much Tax on Your Dividends?
Free UK dividend tax calculator for 2026-27. Calculate tax on dividend income from shares and investments outside ISAs and pensions.
Dividend income from shares held outside ISAs and pensions is subject to dividend tax in the UK. The tax-free dividend allowance has been reduced to £500 per year (down from £2000 in 2022-23). Dividends above this are taxed at 8.75% (basic rate) 33.75% (higher rate) or 39.35% (additional rate). This makes ISA and pension wrappers even more important for dividend investors seeking tax-efficient income.
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Key Information
| Parameter | Details |
|---|---|
| Dividend Allowance (2026-27) | £500 tax-free |
| Basic Rate Dividend Tax | 8.75% |
| Higher Rate Dividend Tax | 33.75% |
| Additional Rate Dividend Tax | 39.35% |
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Use Calculator NowFrequently Asked Questions
How much tax on £5000 dividends UK?
On £5000 dividend income: the first £500 is tax-free. The remaining £4500 is taxed at your marginal dividend rate. For a basic rate taxpayer: £4500 x 8.75% = £393.75 tax. For a higher rate taxpayer: £4500 x 33.75% = £1518.75 tax. This is why holding dividend-paying shares inside an ISA where all dividends are tax-free is strongly recommended.
Should I hold dividends in ISA or outside?
Always prioritize ISA for dividend-paying investments. Inside a Stocks and Shares ISA all dividends are completely tax-free regardless of amount. With only £500 dividend allowance outside ISA a portfolio generating £3000 in annual dividends saves £218 (basic rate) to £843 (higher rate) in tax annually by being inside an ISA. The £20000 annual ISA allowance should be fully utilized.
How are dividends taxed for company directors?
Company directors who pay themselves through dividends need careful planning. Take salary up to the NI threshold (£12570) tax-free then dividends up to the basic rate band. Dividends above £50270 total income face 33.75% tax. Many accountants recommend a £12570 salary plus dividends strategy to minimize combined income tax and NI contributions.
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Last updated: 24 March 2026