If you receive dividends from shares, then you may have to pay dividend tax. The good news is that dividend tax rates are lower than standard income tax rates. The bad news is that you have to keep track of your own dividend income and report it to HMRC yourself.<\/p>
In this dividend tax guide, we’ll explain how dividend tax is calculated and what the dividend tax rates are. We’ll also reveal how you can use your dividend allowance to receive some dividends tax-free or utilise a stocks and shares ISA<\/a> to shelter your dividends from tax altogether.<\/p> Dividend tax is a tax that’s charged on dividend<\/a> income.<\/p> The amount of dividend tax you pay depends on your income tax band. However, dividends are taxed at lower rates than income from wages and pensions<\/a>.<\/p> If your dividend income takes your total income into a higher tax band, you may pay dividend tax at more than one rate. For example, you may pay some basic rate dividend tax and some higher rate dividend tax.<\/p> How you pay dividend tax depends on how much dividend income you receive.<\/p> If you receive up to \u00a3500 in dividend income, you don’t have to do anything. There’s no tax to pay and you don’t have to report it to HMRC.<\/p> If you receive up to \u00a310,000 in dividends, you can ask HMRC to change your tax code so that your dividend tax is taken from your wages or pension. Alternatively, you can report your dividend income in your Self Assessment tax return. You’ll then be sent a tax bill to pay.<\/p> If you receive more than \u00a310,000 in dividends, you must fill in a Self Assessment tax return. You’ll then be sent a tax bill including your dividend tax and any other tax or National Insurance payments you owe.<\/p> The dividend allowance is the amount of dividend income you’re allowed to receive tax-free each year.<\/p> The dividend allowance is \u00a3500.<\/p> In addition to this, you don’t have to pay tax on dividends that are received inside your personal allowance. That’s the amount of income you can receive each year without paying tax. The current personal allowance is \u00a312,570.<\/p> To calculate your dividend tax bill, you’ll need 2 pieces of information for the year:<\/p> The personal allowance is \u00a312,570. If your working income is less than your personal allowance, you can use what’s left to reduce your taxable dividend income.<\/p> Once your personal allowance is used up, you have a \u00a3500 dividend allowance. Subtract this from your remaining dividend income to work out how much taxable dividend income you have.<\/p> Finally, apply the correct tax rate to your dividend income. We’ve covered dividend tax rates below.<\/p> Remember, you don’t pay tax on dividends received in a stocks and shares ISA.<\/p> In 2026\/2027, you have a \u00a3500 tax-free dividend allowance. Once that is used up, dividends are taxed based on your income tax band.<\/p> Remember that you can also use your tax-free personal allowance for dividend income.<\/p> Dividend tax is payable the year after you receive the income. For example, for dividends received during the 2024\/2025 tax year, you have until 31 January 2026 to pay any dividend tax that was due.<\/p> The UK tax year starts on 6 April and ends on 5 April the following year.<\/p> The dividend tax rate has changed over time, so what you pay depends on the tax year in which you received dividend income. We’ve included a table here showing the rates for each tax year.<\/p> Remember, you get a \u00a3500 tax-free dividend allowance as well as your tax-free personal allowance of \u00a312,570.<\/p> For example, this means that if you had work income of \u00a312,570 plus \u00a33,000 of dividend income, you would only pay basic rate dividend tax on \u00a31,000 of dividends.<\/p>What is dividend tax?<\/h3>
How is dividend tax paid?<\/h3>
What is the dividend allowance?<\/h3>
How to calculate my dividend tax bill<\/h3>
How much tax do I pay on dividends in 2026\/2027?<\/h3>
When is dividend tax payable?<\/h3>
Which dividend tax rates will I pay?<\/h3>