What this calculator does

Takes total dividend income, other taxable income, and tax code. Returns tax-free dividend allowance used, taxable dividends by band, and total dividend tax due.

The formula

2025/26 rates:
  Dividend allowance: £500 (tax-free regardless of band)
  Basic rate    (income up to £50,270):     8.75%
  Higher rate   (£50,270 – £125,140):      33.75%
  Additional rate (above £125,140):        39.35%

Dividends are treated as the top slice of income.
Step 1: Total income = salary/other income + dividends
Step 2: Apply personal allowance (£12,570) to salary first
Step 3: Apply £500 dividend allowance
Step 4: Tax remaining dividends at the rate of the band they fall into
        (dividends spanning the basic/higher boundary are split)

Assumptions

  • Standard tax code (1257L).
  • No other reliefs applied.
  • UK resident for the full tax year.
  • No dividend income from an ISA or pension (which are tax-free).

Data sources

Figure Value used Source Last checked
Dividend allowance £500 HMRC — Tax on dividends May 2026
Basic rate 8.75% HMRC — Tax on dividends May 2026
Higher rate 33.75% HMRC — Tax on dividends May 2026
Additional rate 39.35% HMRC — Tax on dividends May 2026
Personal allowance £12,570 HMRC — Income Tax rates May 2026

Limitations

  • Does not model salary sacrifice or pension contributions that could shift income bands.
  • Does not handle the personal allowance taper above £100,000 (where £1 of allowance is lost for every £2 of income above £100,000).

Worked example

Salary £40,000, dividends £5,000.

Taxable salary: £40,000 − £12,570 = £27,430 (uses basic rate band)
Remaining basic rate band: £37,700 − £27,430 = £10,270

Dividend allowance: first £500 of dividends is tax-free
Taxable dividends: £5,000 − £500 = £4,500 (all within basic rate band)

Dividend tax: £4,500 × 8.75% = £393.75

Changelog

Date Change
May 2026 Initial publication

Use the Dividend Tax Calculator →