Limited company guide
Dividend tax rates for 2026/27 after the two percentage point increase: 10.75%, 35.75% and 39.35%, the £500 allowance, worked examples and what it means for owner-managers.
Short answer
From 6 April 2026 the dividend ordinary rate is 10.75% and the dividend upper rate is 35.75%, each two percentage points higher than 2025/26. The additional rate stays at 39.35%. The dividend allowance remains £500, and dividends are treated as the top slice of your income, so the rate depends on where they fall against your other income.
Written and reviewed by Waqas Sagar Member of ICAEW, Fellow of ACCA, Fellow of AAT, a double graduate and entrepreneur at heart, helping startups grow and serving thousands of businesses nationwide with an excellent team. Published by LimitedCompany.Accountants, 12 London Road, Morden, London SM4 5BQ. Reviewed 12 September 2026 against 2026/27 UK rates and current Companies House and HMRC guidance.
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QuickBooks PartnerCertified ProAdvisor100+ yearsCombined team experienceFully insuredUp to £2m indemnityFrom 6 April 2026 the dividend ordinary rate is 10.75% and the dividend upper rate is 35.75%, each two percentage points higher than 2025/26. The additional rate stays at 39.35%. The dividend allowance remains £500, and dividends are treated as the top slice of your income, so the rate depends on where they fall against your other income.
The 2026/27 rates
What it costs a typical owner-manager
Timing and planning points
Reporting
Before you act
Dividends falling in the basic rate band are taxed at 10.75%, in the higher rate band at 35.75%, and in the additional rate band at 39.35%. The first £500 of dividends is taxed at 0%, but it still uses up band, so it is an allowance in name rather than an exemption.
The increase applies to the ordinary and upper rates only. Because the loans to participators charge follows the dividend upper rate, section 455 tax on an overdrawn director's loan is also 35.75%.
Take a director on a £12,570 salary drawing £40,000 of dividends. The first £500 is covered by the allowance. Roughly £37,200 falls in the basic rate band at 10.75% and the remainder at 35.75%. Against 2025/26 rates the same drawings cost around £750 more.
The combined position still matters more than the headline. Profit taxed at 19% corporation tax and then distributed at 10.75% is a lower total burden than the equivalent salary once employer National Insurance at 15% is counted, which is why the salary-plus-dividend pattern survives the rise.
Dividends are taxed in the tax year they are declared and become due, not when the cash moves. An interim dividend is normally treated as paid when it is credited to the director's loan account.
Where a company has distributable reserves and two shareholders in different bands, an alphabet share structure can direct dividends to the lower-taxed shareholder. Where a director is close to the £100,000 personal allowance taper, deferring a dividend across a year end can be worth more than the rate difference.
None of this works if there are no distributable profits. Reserves are the constraint, not the tax rate.
Dividends above the allowance go on your Self Assessment return. If the total is modest, HMRC may collect the tax through an adjusted PAYE code instead of a payment on account.
Keep the board minute and the dividend voucher for each distribution. Without them HMRC can argue the payment was salary or a loan.
Rates, thresholds and deadlines quoted here reflect the 2026/27 UK tax year. Check current GOV.UK guidance, or ask us, before relying on them for your own company.
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Frequently asked
10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band, after a £500 dividend allowance.
No. The allowance stayed at £500; the ordinary and upper rates rose by two percentage points.
For most owner-managers, yes, because dividends carry no National Insurance and are paid from profits already taxed at 19% for small companies. The gap narrowed, it did not close.
Yes. The section 455 charge on an overdrawn loan follows the dividend upper rate, so it is 35.75%.
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