What is the dividend allowance?
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In short: £500 a year. Above that, dividends are taxed at 8.75% (basic), 33.75% (higher) or 39.35% (additional).
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Reviewed by Kaiser Khan
The tax-free dividend allowance for 2026/27 is £500 per person. It was £2,000 as recently as 2022/23, before being reduced to £1,000 and then £500.
Dividend income above £500 is taxed on top of your other earnings: 8.75% in the basic-rate band, 33.75% in the higher-rate band and 39.35% in the additional-rate band.
Dividends paid into Stocks & Shares ISAs or pensions are not counted and are not taxed, so wrapping share investments first is usually the simplest way to avoid dividend tax.
Primary source: gov.uk/tax-on-dividends
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