What is the dividend allowance in 2025/26?

£500. This is the amount of dividend income you can receive tax-free each year. It fell from £2,000 in 2022/23 to £1,000 in 2023/24 and to £500 in 2024/25 onwards.

What are the dividend tax rates in 2025/26?

8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers, and 39.35% for additional rate taxpayers. Dividends sit on top of other income when calculating which band applies.

Tax Law

Dividend Tax Calculator 2025/26 — Company Directors & Investors

Q: Do I pay NI on dividends?

No. Dividends are not subject to National Insurance — either employee or employer NI. This is a key advantage for company directors extracting profits as dividends.

Dividends are taxed differently from salary. The dividend allowance is just £500 in 2025/26 — down from £2,000 in 2022/23. This calculator works out exactly how much tax a company director or investor owes on dividend income.

📊 Dividend Tax Calculator — 2025/26

Dividend allowance: £500 | Basic rate: 8.75% | Higher rate: 33.75% | Additional rate: 39.35%

Other income this tax year (salary, pension, etc.) (£)

Total dividend income this tax year (£)

Personal Allowance (£)

Are you a Scottish taxpayer?

The Shrinking Dividend Allowance

The dividend allowance — the amount of dividend income you can receive tax-free each year — has been cut dramatically since 2016:

2016/17 to 2021/22: £2,000
2022/23: £2,000 → cut to £1,000 from 2023/24
2023/24: £1,000 → cut to £500 from 2024/25 onwards

This means a company director extracting £30,000 in dividends now pays tax on £29,500 of it — compared to £28,000 when the allowance was £2,000.

Dividend Tax Rates 2025/26

Dividends are taxed at special rates that are lower than income tax rates for the same band. However, dividends sit on top of other income when calculating which band applies:

Basic rate band (up to £50,270): 8.75%
Higher rate band (£50,271 – £125,140): 33.75%
Additional rate (above £125,140): 39.35%

Do I pay NI on dividends?+

No. Dividends do not attract National Insurance contributions — neither employee nor employer NI. This is one of the main tax advantages of extracting profits as dividends rather than salary, though the difference has narrowed significantly as dividend tax rates have risen.

How do I report dividend income?+

You report dividends on your Self Assessment tax return (SA100, supplementary pages SA103). The deadline for online returns is 31 January following the tax year. If your total dividend income is £10,000 or less and you pay tax at the basic rate only, HMRC may collect tax through your PAYE tax code instead.

What is the most tax-efficient salary and dividend split?+

For most owner-directors with no other income, the optimal split is a salary at the National Insurance primary threshold (£12,570/year in 2025/26) and the remainder as dividends up to the basic rate band. This minimises NI while using the personal allowance efficiently. The optimal split depends on your specific circumstances — take advice from an accountant.