Dividend allowance

The dividend allowance is the amount of dividend income you can receive each year free of dividend tax. It's £500 for 2026-27 — down from £1,000 in 2023-24 and £2,000 in 2022-23.

Above the allowance, dividend tax rates are 10.75% (basic), 35.75% (higher), and 39.35% (additional) for 2026-27. The ordinary and upper rates each rose 2pp from 6 April 2026. Dividends sit on top of other income in the band stack — so where the allowance falls determines the rate of the next pound of dividend.

The allowance "uses bandwidth": the £500 is tax-free but still occupies its slot in the income stack, so the next pound of dividend is already at the band rate where the allowance fell.

Related terms

• Corporation Tax — Tax on company profits — 19% small profits rate up to £50k, 25% main rate above £250k, with marginal relief between.
• Personal Allowance — The first slice of income you can earn tax-free each year — £12,570, frozen until April 2031.
• Dividend tax — The tax charged on dividend income above the £500 dividend allowance — 10.75%, 35.75%, or 39.35% depending on your tax band (2026-27).