Short answer
The dividend allowance is £500, taxed at 0%. If your personal allowance of £12,570 is unused, dividends covered by it are also tax free, so a director with a £5,000 salary can receive around £8,070 of dividends before any dividend tax.
Directors, salary & dividends
How much can I pay myself in dividends tax free?
The dividend allowance is £500. Combined with an unused personal allowance, a director can receive a larger tax-free total. The arithmetic explained.
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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The dividend allowance is £500, taxed at 0%. If your personal allowance of £12,570 is unused, dividends covered by it are also tax free, so a director with a £5,000 salary can receive around £8,070 of dividends before any dividend tax.
01
Working out your own tax-free figure
02
Do not confuse tax free with cost free
Working out your own tax-free figure
Take £12,570, subtract salary and any other income, and that is the personal allowance available for dividends. Add the £500 dividend allowance on top. With a £5,000 salary: £12,570 − £5,000 = £7,570, plus £500, giving £8,070 of dividends before tax starts.
Above that, dividends are taxed at 10.75% to the basic rate limit, 35.75% in the higher rate band and 39.35% above the additional rate threshold. The dividend allowance uses up band, so it reduces the tax rather than extending your bands.
Do not confuse tax free with cost free
Corporation tax has already been paid on the profit those dividends come from. A tax-free dividend at the personal level still cost the company 19% to 25%, which is why total extraction cost matters more than the headline personal rate.
Dividends also require distributable reserves and proper documentation. Taking money because the bank balance allows it is the most common director error we correct.
Before you act
Rates, thresholds and deadlines quoted here reflect the 2026/27 UK position and current Companies House and HMRC guidance. Check GOV.UK, or ask us, before relying on them for your own company.
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Frequently asked
How much can I pay myself in dividends tax free?: questions directors ask
Can my spouse receive dividends too?
Only if they genuinely own shares. Real ownership with full rights is required; a nominal arrangement to shift income can be challenged under the settlements legislation.
Do tax-free dividends go on my tax return?
Yes, dividends within the allowance are still reported where a return is required.
Has the allowance changed?
It has fallen from £2,000 to £1,000 to £500 in recent years, so plan on the current figure rather than one you remember.
What records are needed for how much can i pay myself in dividends tax free?
Keep bank statements, sales and platform reports, purchase invoices, payroll records, VAT workings, finance agreements and Companies House correspondence. We confirm the exact list at onboarding and identify gaps before a filing deadline becomes urgent.
How much does help with how much can i pay myself in dividends tax free cost?
The fee depends on transaction volume, record quality, VAT and payroll requirements, historic catch-up and the level of reporting needed. We agree a fixed scope and price before technical work starts, with published packages available on our fees page.
Can you take over how much can i pay myself in dividends tax free from another accountant?
Yes. We request professional clearance, collect the prior records and authorities, check the next Companies House and HMRC deadlines, and give you one clear handover list. The process is normally completed remotely.
Can how much can i pay myself in dividends tax free be handled online?
Yes. We work through secure cloud records, scheduled reviews and digital approvals, while keeping a named team available by phone, video call and email. Clients can also visit our Morden office by appointment.
Which accounting software works best for how much can i pay myself in dividends tax free?
We regularly work with Xero, QuickBooks, FreeAgent, Sage and connected sales or expense apps. The right setup depends on transaction volume, integrations and the reports you need, not simply the software brand.
What tax deadlines matter for how much can i pay myself in dividends tax free?
The relevant calendar may include annual accounts, Corporation Tax payment and return dates, confirmation statements, VAT returns, payroll submissions and Self Assessment. We map the dates from your company year end and registrations.
Is this how much can i pay myself in dividends tax free guidance personal tax advice?
No. This page explains general UK rules and common accounting treatment. Your facts, contracts and wider tax position must be reviewed before you rely on a conclusion.
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Check the current rules
Use official information as your reference point.
Deadlines, thresholds and filing rules change. GOV.UK and Companies House publish the current statutory position; advice should then be applied to your company’s circumstances.