Free UK Tool · 2025/26 Rates

Dividend Tax Calculator

Calculate your dividend tax bill and compare taking income as salary versus dividends — useful for limited company directors planning the most tax-efficient withdrawal.

Dividend Tax
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Personal tax
Net Dividend Income
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After dividend tax
Tax-Free Allowance Used
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Of £500 dividend allowance
Effective Rate
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On dividend income

Common questions

Basic rate: 8.75%. Higher rate: 33.75%. Additional rate: 39.35%. The first £500 of dividends is tax-free (dividend allowance). Dividends in an ISA are completely exempt.
For 2025/26, the most common strategies are: £9,100 (below the employer NI secondary threshold — no NI for employer or employee) or £12,570 (equal to the personal allowance — no income tax, and if you have the Employment Allowance it covers any employer NI). The £12,570 option is usually better for sole directors without the Employment Allowance only if you have other non-director employees who benefit from the allowance.
No. NI is not charged on dividends. This is a key advantage over salary. However, only employment income (salary) builds State Pension qualifying years and entitlement to contributory benefits. Taking all income as dividends with no salary can create NI gaps.
£500. This was reduced from £2,000 to £1,000 in 2023/24 and from £1,000 to £500 in 2024/25. Dividends above £500 are taxed at 8.75%, 33.75%, or 39.35% depending on your income band.
Via Self Assessment. If dividends exceed £500, you must register for Self Assessment and declare them on your tax return, paid by 31 January following the tax year. PAYE does not collect dividend tax automatically. As a company director you'll almost certainly need to complete a Self Assessment return regardless.
No. Dividends inside a Stocks and Shares ISA are completely tax-free and do not count against the £500 allowance. The annual ISA allowance is £20,000 for 2025/26 — maximising this for dividend-paying investments is very tax-efficient.
Yes — this is important. Dividends are paid from post-corporation-tax profits (19–25%), while salary is a deductible business expense (reducing corp tax). A full director's tax analysis needs to account for both layers. This calculator shows personal tax only. In practice, taking a salary up to the personal allowance and the rest as dividends is usually most efficient when corporation tax is factored in.

How Dividend Tax Works in 2025/26

Dividends are paid from company profits after corporation tax has already been deducted — so there is an element of double taxation compared to employment income. The first £500 of dividends each year (the dividend allowance) is tax-free. Above this, dividends are taxed at rates that depend on which income tax band they fall into, after all your other income has been accounted for first.

Dividend tax rates 2025/26

Basic rate band: 8.75%. Higher rate band: 33.75%. Additional rate band: 39.35%. These rates are significantly lower than the equivalent income tax rates (20%, 40%, 45%), which is why taking income as dividends from a limited company can be tax-efficient — but the company pays corporation tax (25% for profits above £250,000, 19% below £50,000) on the profits before they can be distributed.

Salary versus dividends for limited company directors

Most limited company directors take a small salary (often around the NI secondary threshold: £5,000 in 2025/26) to minimise employer and employee NI, then take the rest as dividends. The salary is deductible from corporation tax; dividends are not. The optimal split depends on your total income, personal allowance usage, dividend allowance, and the corporation tax rate your company pays.

The salary vs dividends comparison in this calculator gives you a side-by-side view of take-home under both approaches based on your numbers. Note that it does not account for corporation tax — a company pays CT on profits before dividends are distributed, which affects the true comparison. Always verify with an accountant for significant decisions.

Dividends inside an ISA

Dividends received within a Stocks and Shares ISA are completely free from dividend tax, no matter how large. For investors receiving significant dividend income from a shares portfolio, using the ISA allowance (£20,000 per year) is one of the most straightforward tax-saving moves available.