UK Dividend Tax Calculator 2025/26

The dividend tax allowance for the 2025/26 tax year is £500. This means you can receive £500 in dividends tax-free, in addition to your personal allowance of £12,570. Any dividends above £500 (after applying unused personal allowance) are subject to dividend tax at 8.75%, 33.75%, or 39.35% depending on your total income level.

Dividend tax rates for the 2025/26 tax year are:

• Basic rate taxpayers: 8.75% (total income between £12,571 and £50,270)
• Higher rate taxpayers: 33.75% (total income between £50,271 and £125,140)
• Additional rate taxpayers: 39.35% (total income over £125,140)

The rate you pay depends on your total taxable income, including both salary and dividends.

No, you do not pay National Insurance contributions on dividend income. National Insurance is only payable on employment income (salary) and self-employment profits. This is one of the key tax advantages of extracting profits from a limited company through dividends rather than salary. However, you still need to pay dividend tax on dividends above your allowances.

The personal allowance for the 2025/26 tax year is £12,570. This is the amount you can earn tax-free before paying income tax. However, the personal allowance is reduced by £1 for every £2 you earn over £100,000. This means if you earn £125,140 or more, you have no personal allowance at all. The personal allowance is applied to your salary or other income first, and any unused amount can then be applied to your dividends.

You need to report dividend income to HMRC through a Self Assessment tax return if:

• Your dividend income exceeds £10,000 in a tax year
• You have untaxed income from dividends above £500
• You're already registered for Self Assessment
• You receive dividends from a limited company you control

Even if your dividends are below the reporting threshold, it's good practice to keep records. You need to declare all dividend income on your tax return, including amounts within your allowances. Our accountants can help you file your Self Assessment return accurately.

Dividend tax is paid through Self Assessment with the following key deadlines:

• 31 January: Balancing payment for the previous tax year (e.g., 31 Jan 2026 for 2024/25)
• 31 January: First payment on account for the current tax year
• 31 July: Second payment on account for the current tax year

If you owe more than £1,000 in tax through Self Assessment, you'll need to make payments on account - advance payments towards next year's tax bill. Missing these deadlines results in penalties and interest charges from HMRC.

Yes, our dividend tax calculator uses the official HMRC tax rates and thresholds for the 2025/26 tax year. The calculations are based on current UK tax legislation and include personal allowance (£12,570), dividend allowance (£500), income tax, National Insurance, and dividend tax at the correct rates (8.75%, 33.75%, 39.35%). However, the calculator provides estimates for general guidance. Your actual tax liability may vary based on individual circumstances such as pension contributions, gift aid donations, or other tax reliefs. For personalized tax advice, please consult our qualified accountants.

The most tax-efficient approach for limited company directors is typically to take a small salary combined with dividends. Here's why:

• Salary: Take around £12,570 (personal allowance) to maximize tax-free income and build National Insurance credits for state pension
• Dividends: Extract additional profits as dividends to avoid National Insurance (saving 8-13.8% compared to salary)
• No employer NI: Dividends don't incur employer National Insurance (13.8%), reducing company costs

The optimal salary/dividend split depends on your circumstances. Our accountants can help you plan the most tax-efficient remuneration strategy. Use both our Salary & Dividend Tax Calculator and this calculator to compare different scenarios.