How much dividend can I take tax-free in 2026/27?

The dividend allowance for 2026/27 is £500. Dividends up to this amount are tax-free regardless of your income tax band. Above £500, you pay dividend tax at 10.75% (basic rate), 35.75% (higher rate) or 39.35% (additional rate) depending on which band the dividends fall in when added to your other income.

What is the most tax-efficient salary and dividend combination for 2026/27?

For a sole director without other employees, the typical approach is: salary of £12,570 (uses the full Personal Allowance, no employee income tax or employee NI), then extract remaining post-Corporation-Tax profits as dividends. The company pays Employer NI of 15% on salary above £5,000 (the Secondary NI threshold). This structure minimises combined Corporation Tax and personal tax.

Are dividends subject to National Insurance?

No. Dividends are not subject to National Insurance contributions — neither employee NI nor employer NI. This is the primary tax advantage of extracting profits as dividends rather than salary for limited company directors. Only salary/employment income is subject to NI.

How do I report dividends on Self Assessment?

If your dividend income exceeds £500 in a tax year, you must report it on a Self Assessment tax return (SA100 with supplementary pages). You declare the gross dividend received and HMRC calculates the tax owed. Tax on dividends is not deducted at source — you pay it via Self Assessment by 31 January following the tax year end.

What is the dividend allowance in 2026/27?

The UK dividend allowance is £500 for 2026/27. This means you can receive up to £500 in dividends tax-free each year, regardless of your other income. The allowance was cut from £1,000 to £500 in April 2024 and remains at £500 for 2026/27.

Do I pay income tax or dividend tax on dividends?

You pay dividend tax (not income tax) on dividend income. Dividend tax rates are lower than income tax rates: 10.75% in the basic rate band, 35.75% in the higher rate band, 39.35% in the additional rate band. Dividends are added on top of your other income to determine which band they fall in.

What is Corporation Tax in 2026/27?

The Corporation Tax small profits rate is 19% on company profits up to £50,000. The main rate is 25% on profits above £250,000. Between £50,000 and £250,000, marginal relief applies. The distributable profit (what you can pay as dividends) is the profit after deducting Corporation Tax.

Dividend Tax Calculator 2026/27 — Director Salary + Dividends

Where these figures come from. See the dividend allowance and dividend tax rates applied above, each with its official source and the date UKCalc last checked it, on the 2026/27 rates and thresholds UKCalc uses.

Your salary and dividends

Director salary (gross, before tax)

Dividend income (from your company, before personal tax)

Other income (e.g. rental profit or pension income — optional)

Annual take-home pay

Director salary

Dividend income

Other income

Income tax on salary and other income

Employee NI on salary

Total personal tax

Annual take-home

Effective rate

2026/27 dividend tax rates

Band	Rate
Dividend allowance (first £500)	0%
Basic rate dividend	10.75%
Higher rate dividend	35.75%
Additional rate dividend	39.35%

How dividend tax works for limited company directors

As a limited company director, you typically take a low salary and extract the rest of the company's profits as dividends. Dividends come from post-Corporation-Tax profit and are taxed at your personal dividend tax rates — which are lower than income tax rates and carry no National Insurance.

The salary + dividend strategy

The most common approach in 2026/27 for a sole director:

Salary: £12,570 — uses the full Personal Allowance. No employee income tax, no employee NI. Company pays Employer NI of 15% on £7,570 (£1,136/year) which is deductible.
Remaining company profit: pay 19% Corporation Tax (small profits rate ≤ £50k), then distribute post-tax profit as dividends.
Dividends: first £500 tax-free (Dividend Allowance), then 10.75% in the basic rate band, 35.75% in the higher rate band.

Why dividends are taxed differently

The company already paid Corporation Tax on the profits before distributing them. Dividend tax rates are lower than income tax rates to account for this double taxation. No National Insurance is charged on dividends — this is the key structural advantage over salary.

Dividend allowance 2026/27: £500

The first £500 of dividend income each year is tax-free. This allowance applies to everyone — whether you are a company director, investor, or both. It was reduced from £1,000 to £500 in April 2024 and remains at £500 for 2026/27.

Frequently asked questions

The dividend allowance is £500 for 2026/27 — dividends up to this amount are tax-free. Above £500, dividend tax rates apply: 10.75% (basic rate), 35.75% (higher rate), 39.35% (additional rate). Dividends inside an ISA or pension wrapper are always tax-free and do not count toward the allowance.

For a sole director without other employees: salary of £12,570 (uses full Personal Allowance, no employee tax/NI, company pays £1,136 Employer NI which is deductible). Then extract post-Corporation-Tax profits as dividends. This minimises total tax on company income. The calculator above shows the take-home for any combination.

No — dividends are not subject to any National Insurance contributions. Only salary/employment income is subject to NI. This is the primary tax advantage of the salary+dividends structure for limited company directors.

If your dividends exceed £500, report them on your Self Assessment tax return (SA100 with supplementary pages). Declare the gross dividend received. Tax on dividends is not deducted at source — you pay via Self Assessment by 31 January following the tax year.

No. Dividends must come from distributable profits (post-Corporation-Tax retained earnings). Paying dividends in excess of available profits is illegal. Always check your company's retained profit position before declaring a dividend — your accountant or accounting software can confirm the available distributable reserves.

Related calculators and guides

How UK dividend tax works in 2026/27

UK dividend tax for 2026/27 uses three rates that sit above your Personal Allowance and the £500 Dividend Allowance: 10.75% (basic rate), 35.75% (higher rate), and 39.35% (additional rate). The Dividend Allowance has fallen sharply — from £2,000 in 2022/23 to just £500 from April 2024, making dividend income materially less tax-efficient than it was a few years ago for company owners and shareholders.

Dividends are taxed AFTER your salary or other earnings determine your tax band — so a £25,000 salary plus £15,000 of dividends would have the first £500 of dividends tax-free, then the remaining £14,500 taxed at 10.75% (basic rate), producing about £1,559 of dividend tax. The same £15,000 dividends on top of a £50,000 salary would push you into higher-rate dividend territory: the slice taking you above £50,270 is taxed at 35.75% instead.

For limited-company directors paying themselves via salary + dividends, the standard 2026/27 strategy is to take a salary up to the £12,570 Personal Allowance threshold (no income tax, no employee NI on that amount, though employer NI applies on salaries above £5,000) and the rest as dividends. With Class 1 employer NI at 15% above the £5,000 Secondary Threshold, a director salary of £12,570/year (the Personal Allowance) uses the allowance in full and preserves NI credits for State Pension qualification; employer NI of £1,135.50 arises on the excess above £5,000, which the Employment Allowance covers for eligible companies.

Dividends inside an ISA are completely tax-free — no Dividend Allowance is consumed, no dividend tax due, even if a single stock pays you £20,000 in dividends. This makes the £20,000 annual ISA allowance disproportionately valuable for dividend investors. Outside an ISA, dividends from buy-to-let property held via a limited company, or from a stocks-and-shares portfolio, all count toward the same £500 allowance — meaning the allowance fills up quickly for anyone with meaningful investment income. Strategic timing of dividend declarations across tax years can help spread liability and avoid pushing into higher-rate bands.

Rates and sources

Every statutory figure this calculator applies, and the official source for each. Last checked on 2 September 2026.

Dividend tax rates 2026/27 — 10.75% within the basic rate band, 35.75% within the higher rate band, 39.35% above. These rates apply to dividend income above the £500 dividend allowance and took effect on 6 April 2026 (the basic and higher rates each rose by 2 percentage points). GOV.UK: Tax on dividends
Dividend allowance — £500 a year, unchanged for 2026/27. GOV.UK: Tax on dividends
Income tax bands — personal allowance £12,570; basic rate to £50,270; higher rate to £125,140; additional rate above. GOV.UK: Income Tax rates and Personal Allowances
Employee National Insurance — 8% between £12,570 and £50,270, 2% above. GOV.UK: National Insurance rates and categories

How the calculation works. Dividends are treated as the top slice of your income: your salary and other income are taxed first, and dividends are then taxed at whichever bands remain. Dividend tax is set UK-wide and is not devolved — Scottish taxpayers pay the same dividend rates, and the UK basic and higher rate limits (not the Scottish bands) decide which dividend rate applies. Figures are annual and assume a full 2026/27 tax year on a standard tax code. The calculator does not model salary sacrifice, pension contributions, student loan deductions or the marriage allowance. National Insurance is worked out on the director salary only: rental profit and pension income carry none. If you also have another job or self-employed profits, you can include them in other income for income tax, but the National Insurance on them (Class 1 on that job, or Class 4 at 6% and 2% on self-employed profits) is not included.

Correction, 26 October 2026. Before this date the calculator did not count dividends covered by the £500 dividend allowance towards the basic and higher rate limits, did not reduce the higher rate band by the part your salary had already used, and did not let any Personal Allowance your salary left unused cover your dividends. Depending on the mix, that understated dividend tax (for example £12,570 salary and £38,200 dividends: £4,053 instead of £4,177.75; £130,000 salary and £10,000 dividends: 35.75% instead of 39.35% on £9,500, £3,396 instead of £3,738.25) or overstated it (£10,000 of dividends with no other income: £1,021 instead of £0). Dividends inside the allowance are tax-free but still use band space, and an unused Personal Allowance covers dividends before the allowance. The worked example above also gave an out-of-date figure (£1,269); at the 2026/27 basic rate of 10.75% it is about £1,559. The calculator also charged employee National Insurance on other income such as rental profit or pension income, which carry none (for example £20,000 salary and £5,000 rental profit: £994 of National Insurance instead of £594). No rate changed.