Dividend Tax 2025/26 (UK): rates, allowance, bands, examples & planning

What exactly do you pay on dividends in 2025/26? What’s tax-free, where do the UK bands sit (and what if you live in Scotland), and what should limited-company directors do differently this year? This guide lays it out in plain English, with scannable tables, worked examples, and the compliance admin you must get right.

Dividend tax 2025/26 — key facts (in plain words)

The first £500 of your dividends is taxed at 0%. It still uses up part of your tax bands.
Above that, dividends are taxed at 8.75%, 33.75%, or 39.35% depending on which income band you’re in.
Your Personal Allowance is £12,570. This guide covers 6 April 2025 to 5 April 2026.
If you live in Scotland, you pay the same dividend rates as the rest of the UK. (Scottish rates only change tax on wages/self-employed income, not dividends.)
HMRC stacks income: your dividends sit on top of your other income, so you can pay at more than one rate if they cross bands.
ISA dividends are tax-free and don’t go on your tax return.

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2025/26 snapshot (what to know in 60 seconds)

Dividend allowance: £500 at a 0% rate (you still add these dividends into the band calculations). GOV.UK
Dividend tax rates: 8.75% (basic), 33.75% (higher), 39.35% (additional). GOV.UK
Personal Allowance: £12,570, tapered away £1 for every £2 above £100,000 (zero by £125,140). GOV.UK
Scottish taxpayers: you pay the same tax as the rest of the UK on dividends (Scottish rates only affect non-savings/non-dividend income). GOV.UK

Related: Director Pay Guide (2025/26) • NIC, PAYE & Pension Costs (2025/26)

How dividend tax actually works (the stack, in plain English)

Add up all income. Your dividend tax rates depend on your total income, HMRC stacks non-savings income first (salary, trading profits), then savings, then dividends last. GOV.UK
Use your Personal Allowance first, then your dividend allowance (0% on the first £500 of dividend income). GOV.UK
Dividends in an ISA are outside the scope of dividend tax. GOV.UK

Compliance hygiene for directors: dividends are not a business expense; you must have distributable profits, minute the decision, and issue a dividend voucher for each payment. GOV.UK
Deep-dive: Dividend Paperwork: Minutes & Vouchers • Illegal Dividends: How to Avoid/Fix

2025/26 rates, bands & the £500 allowance (table)

Numbers below reflect the current tax year: 6 April 2025 → 5 April 2026 and the UK-wide dividend rates. Bands shown are the standard UK bands used for dividend banding (England/Wales/NI). GOV.UK

Item	2025/26 position
Personal Allowance	£12,570 (tapered above £100k; zero by £125,140). GOV.UK
Dividend allowance	£500 at 0% (still counts towards your band limits). GOV.UK
Dividend tax rates	8.75% (basic), 33.75% (higher), 39.35% (additional). GOV.UK
UK income tax bands (for banding purposes)	Basic: £12,571–£50,270 • Higher: £50,271–£125,140 • Additional: over £125,140. GOV.UK
Scottish note	Scottish rates apply to non-savings/non-dividend income only — dividends use UK-wide rates. GOV.UK

Planning context (directors): for NI thresholds, benefits and pensions on salary/bonuses, see NIC, PAYE & Pension Costs (2025/26); for the whole mix, see Director Pay Guide.

Worked examples (scannable maths)

Assumptions unless noted: single director, no other income, standard Personal Allowance, England/Wales/NI banding.

A) Basic-rate director: £12,570 salary + £10,000 dividends

Salary fully covered by PA → £0 taxable salary.
Dividends £10,000 → first £500 at 0% (allowance) → £9,500 @ 8.75% = £831.25 dividend tax. GOV.UK

B) Higher-rate crossover: £45,000 salary + £20,000 dividends

Taxable salary after PA = £32,430 → leaves £5,270 of basic band for dividends (basic band width £37,700).
Dividends £20,000 → £500 allowance → £19,500 taxable.
£5,270 @ 8.75% = £461.13; £14,230 @ 33.75% = £4,802.63 → Total dividend tax = £5,263.75. GOV.UK

C) Additional-rate director: £140,000 salary + £10,000 dividends

PA fully tapered to £0 above £125,140.
Dividends £10,000 → £500 allowance → £9,500 @ 39.35% = £3,738.25. GOV.UK

D) Scottish taxpayer (clarifier): £40,000 wages + £5,000 dividends

Your earned income uses Scottish rates, but dividends still use UK bands and the 8.75%/33.75%/39.35% rates after the £500 allowance. (Result: with wages at £40k and standard PA, your dividend slice normally falls in the basic dividend rate unless other income pushes you higher.) GOV.UK

First time taking sizeable dividends? Read Payments on Account for Dividends — HMRC may ask for payments on account in January/July depending on last year’s bill and how much was collected via PAYE. GOV.UK
Want to see the tax cashflow laid out? Use our Cashflow Forecasting (52-week) approach.

Reporting & paying HMRC (what to file, when to pay)

Over £10,000 dividends? You must file a Self Assessment tax return — if you’re new to SA, register by 5 October after the end of the tax year. GOV.UK
Up to £10,000 dividends and not in SA? You normally do not need a return; you can ask HMRC to update your tax code or contact the helpline. If your dividends are within the £500 allowance, you do not need to tell HMRC. GOV.UK
When you’ll pay: balancing payment 31 January; and if POA applies, 31 January and 31 July (two instalments, each half last year’s bill) — no POA if last year’s bill was <£1,000 or ≥80% was collected at source (e.g., PAYE). GOV.UK
Coding-out option (small underpayments): if you owe <£3,000, already pay via PAYE, and file by 30 December, HMRC can collect through your tax code. GOV.UK

Step-by-step help: Reporting Dividends: Self Assessment • Payments on Account for Dividends

Directors: paying dividends correctly (paperwork that protects you)

To pay a lawful dividend you must have profits available for distribution, make a board decision, keep minutes, and issue a dividend voucher (date, company, shareholder(s), amount). Keep copies with your company records. GOV.UK

Avoid “unlawful distributions.” Distributions may only be made out of profits available (Companies Act 2006, Part 23); HMRC’s Company Taxation Manual gives the framework practitioners use. GOV.UK
Practical how-to and templates: Dividend Paperwork: Minutes & Vouchers • Illegal Dividends: How to Avoid/Fix

Planning ideas to keep more of what you earn (legit, GOV.UK-aligned)

Optimise the pay mix: blend salary (for NI thresholds, benefits, pension auto-enrolment) with dividends (no NI). For the full comparison, including when a bonus might be better (CT-deductible; NI applies), see Dividend vs Bonus (Directors, 2025/26).
Shelter investment dividends in an ISA: annual adult ISA allowance £20,000; ISA dividends are tax-free and do not go on your SA return. GOV.UK
Pensions: consider employer contributions (subject to the usual tests) as part of your total reward strategy; coordinate with drawings and cashflow.
Timing: declaring before/after 5 April can move a dividend between tax years, but only pay dividends where you have real profits and clean paperwork. GOV.UK

For NI thresholds, benefits-in-kind, and employer costs see NIC, PAYE & Pension Costs (2025/26). To test any plan against real cash dates, use Cashflow Forecasting (52-week).

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FAQs

Do I pay National Insurance on dividends?
No. Dividends are not “earnings” for NI, NI applies to salary/bonus. (See NIC, PAYE & Pension Costs for thresholds and interactions.) GOV.UK

Are dividend rates different in Scotland?
No. You’ll pay the same tax as the rest of the UK on dividends; Scottish rates only apply to non-savings/non-dividend income. GOV.UK

Do I need to file if my dividends are under £500?
Usually no (if there’s no other Self Assessment trigger). Over £10,000? You must file SA and, if new, register by 5 October. GOV.UK

What paperwork do I need for a dividend?
Board minute and a dividend voucher for each payment; keep copies with your company records. GOV.UK

When do payments-on-account hit?
HMRC may ask for two instalments, 31 January and 31 July, unless last year’s bill was <£1,000 or ≥80% was collected via PAYE. GOV.UK

Next Steps

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Sources (key GOV.UK references used above)

Tax on dividends — rates, allowance, how banding works, ISA dividends. GOV.UK
Income Tax rates & Personal Allowances — current tax year is 6 Apr 2025 → 5 Apr 2026, bands, tapering. GOV.UK
How to report tax on dividends — £10,000+ SA trigger, 5 October registration, code-out note for ≤£10k. GOV.UK
Payments on account — dates (31 Jan/31 Jul) and the £1,000/80% tests. GOV.UK
Income Tax in Scotland — you pay the same as rest of UK on dividends. GOV.UK
Running a limited company: taking money out — dividends paperwork (voucher contents, records). GOV.UK
ISAs (GOV.UK) — adult ISA limit £20,000 and 2025/26 example (flexible ISA illustration). GOV.UK