The dividend allowance is £500 for the 2026 to 2027 tax year, as of October 2026, which means the first £500 of dividends you get above your Personal Allowance is tax-free. Dividends above that are taxed at 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band.
If you run your own limited company and pay yourself partly in dividends, this is one of the numbers that shapes your take-home pay. It halved from £1,000 to £500 over recent tax years, and HMRC's rates table shows the basic rate rising from 8.75% to 10.75% and the higher rate from 33.75% to 35.75% for 2026 to 2027, so last year's planning may already be out of date.
Dividend allowance by tax year
| Tax year | Dividend allowance |
|---|---|
| 2026 to 2027 | £500 |
| 2025 to 2026 | £500 |
| 2024 to 2025 | £500 |
| 2023 to 2024 | £1,000 |
These figures come from HMRC's own table of rates and allowances for current and past years.
Dividend tax rates for 2026 to 2027
| Income Tax band | Tax rate on dividends over the allowance (6 April 2026 to 5 April 2027) |
|---|---|
| Basic rate | 10.75% |
| Higher rate | 35.75% |
| Additional rate | 39.35% |
To find your band, GOV.UK says you add your total dividend income to your other income. That means you can pay tax at more than one rate, because a large dividend can push part of your income into the next band.
How the allowance works with your Personal Allowance
There are two separate tax-free layers. GOV.UK says you don't pay tax on any dividend income that falls within your Personal Allowance, and then you also get the £500 dividend allowance on top. Dividends from shares held in an ISA aren't taxed at all.
GOV.UK's own worked example for 2026 to 2027 shows how it adds up:
- You get £3,000 in dividends and earn £29,570 in wages, a total income of £32,570.
- Your Personal Allowance of £12,570 comes off first, leaving taxable income of £20,000.
- That's all in the basic rate band, so you pay 20% tax on £17,000 of wages.
- The first £500 of dividends is covered by the dividend allowance.
- The remaining £2,500 of dividends is taxed at 10.75%.
The insight in that example: the allowance isn't extra Personal Allowance. It still counts towards your total income when HMRC works out which band you're in. It just sets the first £500 of dividends at a zero rate.
When you need to tell HMRC
| Your dividends over both allowances | What GOV.UK says to do |
|---|---|
| Up to £10,000, and you already file Self Assessment | Report them on your tax return |
| Up to £10,000, and you don't file Self Assessment | Tell HMRC after 5 April and before 5 October, for example by asking HMRC to update your tax code so the tax comes from your wages or pension |
| Over £10,000 | Fill in a Self Assessment return. If you don't usually send one, register by 5 October after the end of the tax year |
If you're not sure whether you need a return at all, my guide on UK tax year dates lists the deadlines.
Four mistakes to avoid
- Treating the £500 as extra Personal Allowance. It isn't: your dividends still count towards your total income, so they can push you into a higher band.
- Forgetting that dividends in an ISA are separate. They're tax-free and don't use up your £500.
- Missing the 5 October deadline. If you don't normally file a return and your dividends go over both allowances, HMRC needs to hear from you between 6 April and 5 October.
- Using last year's rates. The 2026 to 2027 rates in GOV.UK's table are higher than the year before for basic and higher rate taxpayers, so any spreadsheet built on old rates will understate the tax.
None of these need an accountant to fix. They need a diary note and a quick look at GOV.UK's tax on dividends page every April, when the tax year changes.
What it means for company directors
For a director paying themselves through a limited company, the £500 allowance is now a small cushion rather than a planning tool. With the basic rate on dividends now at 10.75%, it's worth reworking the salary and dividend split each April instead of rolling last year's figures forward. That's a conversation for your accountant, but you should know the inputs: your Personal Allowance, the £500 dividend allowance and the band your total income lands in. If your side income is small and outside a company, my guide to the HMRC trading allowance may be the more relevant tax-free amount.
My verdict
Treat £500 as the only dividend tax-free amount you've got beyond your Personal Allowance, and remember it still counts towards your band. If your dividends go over both, you'll need to tell HMRC: by tax code or return up to £10,000, and by Self Assessment above that. And if you set your director's pay before April 2026, check it again with the new rates.
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Frequently asked questions
What is the dividend allowance for 2026/27?
£500 for the 2026 to 2027 tax year, as of October 2026.
What are the dividend tax rates for 2026/27?
10.75% for basic rate taxpayers, 35.75% for higher rate taxpayers and 39.35% for additional rate taxpayers, on dividends above the allowance.
Do I pay tax on dividends within my Personal Allowance?
No. GOV.UK says you don't pay tax on any dividend income that falls within your Personal Allowance, and the £500 dividend allowance applies on top of that.
Was the dividend allowance higher before?
Yes. HMRC's table shows £1,000 for 2023 to 2024, then £500 from 2024 to 2025 onwards.
Are ISA dividends included in the dividend allowance?
No. You don't pay tax on dividends from shares in an ISA.
Do I need to tell HMRC about dividends under £500?
GOV.UK says you need to report dividends that go over both your unused Personal Allowance and your dividend allowance.
How do I find my dividend tax band?
Add your total dividend income to your other income. GOV.UK says you may pay tax at more than one rate if your dividends cross into the next band.
What if my dividends are over £10,000?
You'll need to fill in a Self Assessment return. If you don't usually send one, tell HMRC by registering by 5 October after the end of the tax year.
