Dividend tax brackets follow the income tax bands. The rate on a dividend above the allowance is set by whether the dividend, stacked on top of salary and other income, lands in the basic, higher or additional rate band, and each band has its own dividend rate that is lower than the income tax rate for the same band. This page sets out the brackets for 2026 to 2027 as gov.uk publishes them, how the bands are found for a director whose income is mostly dividends, how the rates changed on 6 April 2026, and why the bracket a company's dividend policy is aimed at is usually the top of the basic rate band. It is HMRC's arithmetic, cited, and not advice on what a particular company should declare.
The three brackets and their rates
For 2026 to 2027, per gov.uk: dividends above the £500 allowance are taxed at 10.75 percent where they fall in the basic rate band, 35.75 percent in the higher rate band and 39.35 percent in the additional rate band. The bands themselves are the income tax bands: the basic rate runs to £37,700 of income after the personal allowance, the higher rate to £125,140, and the additional rate above that. Scottish bands differ for salary but dividends are taxed on the UK bands everywhere.
Finding the band when most of your income is dividends
Add the salary to the dividends and any other income, take off the personal allowance, and see where the total lands. A director on £12,570 of salary and £37,700 of dividends has total income of £50,270, sits exactly at the top of the basic rate band, and pays 10.75 percent on the £37,200 above the allowance. One more pound of dividend is taxed at 35.75 percent. That threshold is why so many owner-directors declare dividends to the top of the basic rate and no further, and it is the figure the free ltd company tax calculator works for your own numbers.
What changed on 6 April 2026
The basic and higher dividend rates rose by two percentage points, from 8.75 percent and 33.75 percent in 2025 to 2026 to 10.75 percent and 35.75 percent, per gov.uk's rates table. The additional rate stayed at 39.35 percent and the allowance stayed at £500. A dividend declared and paid before 6 April 2026 is taxed at the old rates, so the timing of a payment around the year end is worth a few hundred pounds on a typical director's dividend.
Directors dividend tax against salary in the same band
Salary in the basic rate band costs 20 percent income tax plus employee's National Insurance at 8 percent above the primary threshold, plus the company's employer's National Insurance at 15 percent above £5,000, per gov.uk. A dividend in the same band costs 10.75 percent and no National Insurance, but comes out of profit that has already borne corporation tax at 19 percent or more. Which is cheaper overall depends on the company's corporation tax band, and the answer is a sum rather than a rule; the calculator prints both totals.
Questions people ask about dividend tax brackets
Do dividends count towards the higher rate threshold?
Yes. Dividends are income for the purpose of finding the band, including the £500 inside the allowance. A large dividend can move salary interest or other income into a higher band even though the dividend itself is taxed at the dividend rate.
Are the dividend rates the same in Scotland?
Yes. Scottish income tax bands apply to salary and other non-savings income, but dividends are taxed on the UK bands and at the UK dividend rates, per gov.uk. A Scottish director works the salary tax on the Scottish bands and the dividend tax on the UK ones.
Does the personal allowance taper affect dividends?
Yes. Above £100,000 of total income the personal allowance is withdrawn, which pushes more dividend income into the taxed bands and makes the marginal cost of a dividend between £100,000 and £125,140 well above the headline 35.75 percent. A director near that range should run the sum before declaring.