What are the current thresholds for dividend tax this year?
For the 2025/26 tax year, here’s what you need to know:
- Dividend Allowance: £500 (tax-free)
After this, dividends are taxed based on your income tax band:
| Tax Band | Dividend Tax Rate |
|---|---|
| Basic Rate | 8.75% |
| Higher Rate | 33.75% |
| Additional Rate | 39.35% |
? Key points:
- The allowance has reduced significantly in recent years, meaning more dividends are now taxable
- Your tax rate depends on your total income, not just dividends
- Planning ahead (especially before year end) can help reduce your liability
? Example
Let’s say you receive £10,000 in dividends and you’re a basic rate taxpayer:
- First £500 ? tax-free (dividend allowance)
- Remaining £9,500 ? taxed at 8.75%
Tax to pay: £831.25
If you’re unsure how this applies to you, it’s worth getting tailored advice – small adjustments can make a big difference.
Looking ahead to 2026/27
From the 2026/27 tax year, dividend tax rates are increasing to 10.75% for basic rate taxpayers and 35.75% for higher rate taxpayers, while the additional rate remains at 39.35%. The £500 dividend allowance stays the same, meaning more of your dividend income will be subject to tax.
What this means for you:
If you’re planning to extract profits, it may be worth reviewing your strategy before the new tax year begins, as timing could make a noticeable difference. If you are a client we review remuneration strategy in pre year end review so always worth booking in your annual review.