Dividend Allowance
UK tax glossary · Last reviewed: April 2026
Every UK individual can receive £500 of dividend income tax-free in 2026/27. This was cut from £1,000 in 2023/24 and from £2,000 before that. Dividends above the allowance are taxed at 8.75% (basic rate), 33.75% (higher rate), or 39.35% (additional rate).
The dividend allowance is separate from the Personal Allowance. A basic-rate taxpayer with no other income could receive up to £13,070 in dividends tax-free (£12,570 Personal Allowance + £500 Dividend Allowance).
Company directors often take a combination of salary and dividends. The combination is typically optimised so that salary uses the NI secondary threshold and the dividend allowance, with dividends filling the remaining basic-rate band.
Worked example
Dividends received: £5,000. Less allowance: £500. Taxable dividends: £4,500. Basic-rate taxpayer: £4,500 × 8.75% = £393.75 tax. Report via Self Assessment if dividends exceed £500.
Common questions
Do I need to do a Self Assessment return if my dividends are under £500?
No Self Assessment is required for dividends alone below the £500 allowance. However, if you have other reasons to file (e.g. self-employment income), you must still declare all dividends on the return.
Are ISA dividends included in the allowance?
No. Dividends received inside a Stocks and Shares ISA are completely tax-free and do not count toward the £500 Dividend Allowance.
Related resources
TaxHelper provides general information based on published HMRC rates and guidance. It is not regulated financial or tax advice. For decisions involving significant sums, complex circumstances, or if you are unsure, speak to a qualified accountant or HMRC directly.