Dividend Tax UK: Complete 2026/27 Guide
The dividend allowance was £2,000 in 2018. It's £500 today. A 75% cut almost nobody noticed because the news cycle moved on. The fix takes one phone call.
UK dividend allowance: a 75% cut in three years
Source: HMRC. The allowance is the slice of dividend income taxed at 0%.
Dividend tax rates by band, 2026/27
| Band | Total income | Dividend rate |
|---|---|---|
| Personal allowance | Up to £12,570 | 0% |
| Basic rate | £12,570 to £50,270 | 8.75% |
| Higher rate | £50,270 to £125,140 | 33.75% |
| Additional rate | Above £125,140 | 39.35% |
Rates apply above the £500 dividend allowance. Source: gov.uk.
Key takeaways
The dividend allowance for 2026/27 is just £500, down from £2,000 a few years ago.
Above the allowance, dividends are taxed at 8.75% (basic), 33.75% (higher), and 39.35% (additional rate).
Dividends inside an ISA, SIPP, or JISA are fully tax-free and never touch your allowance.
Sheltering shares, splitting holdings with a spouse, and Bed-and-ISA are the three biggest legal levers.