Do I Pay Tax on Dividends from Shares UK? (2026/27)

Yes — on dividends received outside an ISA, SIPP or other tax wrapper. The first £500 per tax year is tax-free under the Dividend Allowance. Above that, dividends are taxed at 10.75% (basic-rate band), 35.75% (higher-rate band) or 39.35% (additional-rate band) for 2026/27. The basic and higher rates rose by 2 percentage points on 6 April 2026 — announced at the Autumn Budget 2024 and confirmed in HMRC’s rates and allowances for 2026/27. The additional rate stayed at 39.35%. Dividends inside a stocks & shares ISA or pension are completely tax-free and don’t use the allowance.

This is the dividend tax framework for 2026/27 — including the April 2026 rate rise.

What counts as a dividend for tax purposes

UK tax treats “dividends” as:

• Dividends from UK company shares (whether listed on the stock market or in a limited company you own).
• Distributions from open-ended investment companies (OEICs) and investment trusts.
• Some other distributions that have a similar character to dividends.

What’s separate:

• Interest (uses the Personal Savings Allowance).
• Capital gains (use the £3,000 annual exemption).
• REIT property income distributions (taxed as property income, not dividends, in many cases).

The April 2026 rate rise

For tax years up to and including 2025/26, the basic-rate dividend rate was 8.75% and the higher rate was 33.75%. The Autumn Budget 2024 announced both would rise by 2 percentage points from 6 April 2026, while the additional rate would stay put.

For 2026/27 the rates are:

• Basic-rate band: 10.75% (up from 8.75%).
• Higher-rate band: 35.75% (up from 33.75%).
• Additional-rate band: 39.35% (unchanged).

The dividend allowance remains £500. The rate rise applies to dividends paid on or after 6 April 2026; dividends paid before that date are still taxed at the old rates.

For someone receiving £15,000 of dividends outside an ISA, the rate change adds roughly £290 per year of additional tax for a basic-rate taxpayer or £290 per year for a higher-rate taxpayer — modest individually, but significant across many investors.

The £500 Dividend Allowance

The first £500 of dividend income each tax year is tax-free under the Dividend Allowance.

Historical context:

• 2017/18 – 2022/23: £2,000.
• 2023/24: £1,000.
• 2024/25 onwards: £500.

The progressive cut combined with the April 2026 rate rise has substantially increased the tax burden on share investors holding outside ISAs.

How dividends sit in your income

Dividends are added on top of your other income. They use up bands in order:

1. Personal allowance is used by non-dividend income first.
2. Basic-rate band then used by non-dividend, then dividends.
3. Higher-rate band for any spillover.

A worked example for 2026/27:

• Salary: £30,000.
• Dividends: £8,000 (outside ISA).

Income tax position:

• Personal allowance: £12,570 (used by salary).
• Salary in basic rate: £30,000 − £12,570 = £17,430. Tax at 20% = £3,486.
• Dividends: first £500 tax-free under allowance.
• Remaining £7,500 of dividends fits within the basic-rate band (combined income £38,000 is below the £50,270 higher-rate threshold).
• Tax on dividends: £7,500 × 10.75% = £806.
• Total income tax: £3,486 + £806 = £4,292.

Under the old 8.75% basic dividend rate, the dividend tax would have been £656. The rate rise costs this investor an extra £150 per year.

Dividends from your own limited company

If you’re a director-shareholder of a limited company, dividends are often a tax-efficient way to extract profit:

• Company pays corporation tax on profits (19–25%).
• After-tax profit is then available for dividends.
• You pay personal dividend tax on the dividend.

A worked example for 2026/27 with a basic-rate dividend recipient:

• Company profit: £40,000.
• Corporation tax at 19%: £7,600 (small profits rate, profits under £50k).
• After-tax profit: £32,400.
• Distributed as dividend.
• Personal dividend tax: (£32,400 − £500) × 10.75% = £3,429.
• Total combined tax: £7,600 + £3,429 = £11,029 (27.6% effective).

The April 2026 rate rise has narrowed the gap between dividend and salary extraction for owner-directors. For high-profit companies, the salary-plus-dividend mix that was conventional pre-2026 may need rebalancing — speak to an accountant.

Dividends inside an ISA — completely tax-free

Dividends received from shares held inside a Stocks & Shares ISA are:

• Not taxed in the UK.
• Don’t use the £500 Dividend Allowance.
• Don’t need declaring on Self Assessment.

With the April 2026 rate rise, the ISA wrapper’s value has gone up. For investors holding dividend-paying shares outside an ISA, the case for shifting them into the wrapper (via bed-and-ISA over multiple tax years) has strengthened.

Dividends inside a pension — completely tax-free until withdrawal

Dividends inside a SIPP or workplace pension:

• Not taxed while inside the pension.
• The pension grows tax-free until you withdraw.
• On withdrawal: taxed as income (the 25% tax-free lump sum aside).

Foreign dividends

If you receive dividends from foreign companies (outside the UK):

• They’re typically subject to foreign withholding tax at source.
• They’re also taxable in the UK at the same dividend rates (10.75/35.75/39.35%).
• The UK-foreign tax treaty typically allows you to claim a credit for foreign tax paid against UK tax owed.

You report foreign dividends on the Foreign Income supplementary page of your Self Assessment.

REIT (Real Estate Investment Trust) dividends

REITs often distribute income as “Property Income Distributions (PIDs)” — which are taxed as property income, not dividends:

• Subject to basic/higher/additional rate income tax (20%, 40%, 45%).
• 20% basic-rate tax is withheld at source by the REIT.
• You report the gross amount on your Self Assessment.

The April 2026 dividend rate rise doesn’t affect PIDs (they were already taxed as income, not dividends). REIT income inside an ISA is completely tax-free.

How dividends interact with the personal allowance taper

A common high-earner scenario: dividends push you over £100,000 of adjusted net income, triggering the personal allowance taper.

• Combined income (salary + dividends) above £100k starts removing £1 of allowance per £2 of income over.
• Personal allowance fully exhausted at £125,140 of adjusted net income.

For directors paying themselves with dividends, this can be unexpectedly punitive. Combined with the April 2026 dividend rate rise, the effective marginal rate on dividends in the £100k–£125,140 band has climbed materially.

Reporting dividends on Self Assessment

You report:

• UK dividends in the “Income from UK dividends” section of the SA100 main form.
• Foreign dividends on the SA106 Foreign Income page.
• Total dividends received in the tax year (not net of withholding tax).

You don’t need to register for Self Assessment for dividends alone if your total dividend income is £500 or below (covered by allowance) AND you don’t need to file for any other reason.

Worked example: higher earner with significant dividends (2026/27)

Karim earns £80,000 salary plus £15,000 of dividends from his investment portfolio (outside ISA) in 2026/27.

Income position:

• Combined: £95,000.
• Personal allowance: £12,570 (used by salary).
• Salary in basic rate: £37,700 × 20% = £7,540.
• Salary in higher rate: (£80,000 − £50,270) = £29,730 × 40% = £11,892.
• Salary income tax: £19,432.

Dividend position (new 35.75% higher rate):

• Dividend allowance: £500 tax-free.
• Remaining dividends: £14,500.
• All in higher rate (combined income above £80,000 puts dividends well above £50,270).
• Higher-rate dividend tax: £14,500 × 35.75% = £5,184.

Total tax: £19,432 + £5,184 = £24,616.

Under the old 33.75% rate, the dividend portion would have been £4,894 — so the rate rise costs Karim £290 in 2026/27.

If the same £15,000 of dividends were inside an ISA: tax saved £5,184. Over a 20-year holding period, the compounding tax saving on a typical dividend-paying portfolio runs to tens of thousands.

Internal links

• How to declare crypto gains to HMRC
• Do I pay tax on freelance income alongside a full time job?
• How do I file a self assessment tax return for the first time?

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This guide is information, not regulated financial advice. Dividend tax rules can change between budgets — confirm on gov.uk: tax on dividends before relying on specific figures. Rates verified from HMRC’s 2026/27 rates and allowances publications.