UK dividend tax explained
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Quick answer: Dividends above your £500 dividend allowance are taxed at 10.75%, 35.75% or 39.35% depending on your income tax band — ISAs and pensions shelter dividends from this tax.
UK investors often receive dividends from shares and funds. HMRC treats these differently from interest on savings. The allowance fell to £500 in April 2024, and the basic and higher dividend rates rose by 2 percentage points on 6 April 2026, so older guides may be wrong. This guide explains how dividend tax works in 2026/27.
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Content updated: 2 min read
Primary source: www.gov.uk/tax-on-dividends
What counts as a dividend
Dividends are payments companies make to shareholders from profits. You also receive dividends from UK and global equity funds, investment trusts and some ETFs held outside tax wrappers.
Interest from bonds and cash accounts is not a dividend — it uses the personal savings allowance and income tax rates instead. Mixing up the two on your tax return is a common mistake that can lead to underpayment.
Rates and allowances
For 2026/27 you have a £500 dividend allowance. Dividends within it are taxed at 0%, but they still count when working out which tax band you are in.
Above the allowance, basic-rate taxpayers pay 10.75%, higher-rate taxpayers 35.75%, and additional-rate taxpayers 39.35%. Welsh rates follow the same dividend structure as England.
Reporting to HMRC
If tax is due and not collected through PAYE, register for Self Assessment and report dividends on your tax return. Payment is due by 31 January after the tax year ends.
Keeping dividend vouchers and fund tax statements makes it easier to report the correct amounts and claim foreign tax credits where applicable. Platforms usually publish annual tax certificates, but you should download them before switching providers.
Common questions
Do I pay tax on ISA dividends?
No. Dividends inside a stocks and shares ISA are free of UK dividend tax. This shelter applies for as long as the investments remain inside the ISA wrapper.
What if my only income is dividends?
You still have your personal allowance and dividend allowance. Tax depends on total income and which bands it falls into.
Can I transfer shares to my spouse to save tax?
Transfers between spouses and civil partners are generally exempt from CGT and can help use both dividend allowances, but anti-avoidance rules apply to artificial arrangements.