Estimate dividend tax with salary + dividend inputs. See band-level tax and net dividends under 2025/26 assumptions.
Updated for 2025/26 · Reviewed by James Whitfield · Methodology and assumptions
Estimate dividend tax in three steps with clear salary-plus-dividend assumptions for the current UK tax year.
Add both figures because dividend tax depends on how much of your basic and higher-rate bands are already used by salary.
See the dividend allowance effect, taxable balance and effective rate so the result is transparent rather than headline-only.
Use the Ltd vs sole trader follow-up link to test whether your current extraction mix remains tax-efficient.
Dividend tax uses the same income bands as income tax, but at lower rates — and dividends sit on top of your other income, meaning the band they fall in depends on how much salary or other income you already have. The dividend allowance for 2025/26 is £500. The first £500 of dividend income is tax-free regardless of your income band.
| Band | Income level | Dividend rate |
|---|---|---|
| Dividend allowance | First £500 | 0% |
| Basic rate | Within basic-rate band | 8.75% |
| Higher rate | Within higher-rate band | 33.75% |
| Additional rate | Above £125,140 | 39.35% |
Dividend tax rates are significantly lower than income tax rates — 8.75% vs 20% at the basic rate, and 33.75% vs 40% at the higher rate. This is why many company directors take a low salary and extract profit as dividends.
Dividends are taxed on top of other income — they do not use a separate allowance. If your salary already uses the basic-rate band, all dividends fall in the higher-rate (33.75%) or additional-rate (39.35%) band. This is why the calculator requires both salary and dividend inputs.
Example: a company director takes a £12,570 salary (using the personal allowance only) and £40,000 in dividends. The first £500 of dividends is covered by the dividend allowance (0%). The remaining £39,500 falls in the basic-rate band and is taxed at 8.75% = £3,456. Total dividend tax: £3,456. Compare this to the same £40,000 taken as salary above £12,570: it would attract 20% income tax = £8,000 on the same basic-rate slice — a difference of approximately £4,544.
A second example: a director with a £50,000 salary who also pays £20,000 in dividends. The salary already uses the entire basic-rate band (£50,270). The dividends fall in the higher-rate band and are taxed at 33.75% (after the £500 allowance): 33.75% × £19,500 = £6,581. This is still less than if the £20,000 had been taken as salary at 40% = £8,000, but the gap narrows considerably compared to the low-salary scenario.
Dividend tax is reported and paid via Self Assessment. If your dividends exceed the £500 allowance, you must register for Self Assessment and report them. Payment is due by 31 January following the tax year end. HMRC does not deduct dividend tax at source — it is your responsibility to report it.
The dividend allowance was reduced from £5,000 (2017/18) to £2,000 (2018/19 to 2022/23), then to £1,000 (2023/24) and £500 (2024/25 onwards). The reduction significantly increased tax bills for directors and investors who previously had substantial dividend-only income within the allowance.
No. Dividends are not subject to employee or employer National Insurance. This is a key reason why company directors choose to extract profit as dividends rather than salary — the NI saving can be significant. However, corporation tax must be paid on profits before dividends can be distributed, which is factored into the overall comparison.
No. Dividend tax rates are UK-wide. The Scottish Parliament sets Scottish income tax bands, but dividend tax rates (8.75%, 33.75%, 39.35%) are identical across all UK regions. The Scotland setting in this calculator only affects income tax on salary, not dividend tax rates.