Dividend Allowance 2025/26
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The Dividend Allowance for 2025/26 is £500 – the amount of dividend income you can receive tax-free each year.
Dividend Tax Rates 2025/26
Tax-Free Allowance
£500.00
Basic Rate
8.75%
Higher Rate
33.75%
Additional Rate
39.35%
Dividend Allowance Has Been Slashed
The Dividend Allowance has been dramatically reduced from £5,000 in 2017/18 to just £500 today. This represents a 90% reduction, significantly increasing the tax burden on shareholders and company directors who rely on dividend income.
Dividend Tax Rates Explained
Dividends are taxed after your other income, which determines which tax band applies. Dividend income above your £500 allowance is taxed at the following rates:
| Tax Band | Income Range | Dividend Rate |
|---|---|---|
| Basic Rate | £12,571 - £50,270 | 8.75% |
| Higher Rate | £50,271 - £125,140 | 33.75% |
| Additional Rate | Over £125,140 | 39.35% |
Calculate Your Dividend Tax
Use our free calculator to work out exactly how much dividend tax you'll pay based on your salary and dividend income.
Open Dividend Tax CalculatorExample: Dividend Tax Calculation
Scenario: You have a salary of £12,570 (using your Personal Allowance) and receive £30,000 in dividends.
| Dividend Allowance (tax-free) | £500 |
| Dividends in Basic Rate band | £29,500 × 8.75% = £2,581.25 |
| Total Dividend Tax | £2,581.25 |
Dividend Allowance History
| Tax Year | Dividend Allowance |
|---|---|
| 2025/26 | £500 |
| 2024/25 | £500 |
| 2023/24 | £1,000 |
| 2022/23 | £2,000 |
| 2018/19 - 2021/22 | £2,000 |
| 2017/18 | £5,000 |
Frequently Asked Questions
What is the Dividend Allowance for 2025/26?
The Dividend Allowance for 2025/26 is £500. This is the amount of dividend income you can receive each tax year without paying dividend tax.
Has the Dividend Allowance changed from 2024/25?
No, the Dividend Allowance remains at £500 for 2025/26. However, it has been significantly reduced over recent years – from £5,000 in 2017/18 to just £500 now.
What are the dividend tax rates for 2025/26?
Dividend tax rates for 2025/26 are: 8.75% (basic rate), 33.75% (higher rate), and 39.35% (additional rate). These apply to dividends above your £500 allowance.
Does the Dividend Allowance use up my Personal Allowance?
No, the Dividend Allowance is separate from your Personal Allowance. However, dividends do count towards your total taxable income when determining which tax band you're in.
How are dividends taxed if I'm a company director?
As a company director, dividends you take from your company are taxed at dividend tax rates. Many directors take a small salary (around £12,570) plus dividends to minimize overall tax.