The first £500 of dividends each year is tax-free. Enter your salary and dividends to see how much of your allowance you've used, what's left, and the tax on anything above it.
£500 allowance · stacked on salary · 2026/27
The dividend allowance is the amount of dividend income you can receive each tax year before any dividend tax is due. For 2026/27 it is £500 — the first £500 of dividends is taxed at 0%, regardless of which tax band you're in. It has been cut sharply in recent years, from £2,000 in 2022/23 down to £500 today.
| Tax year | Dividend allowance |
|---|---|
| 2022/23 | £2,000 |
| 2023/24 | £1,000 |
| 2024/25 onwards | £500 |
| 2026/27 | £500 |
Once your dividends pass £500, the excess is taxed at the dividend rates — 8.75% in the basic band, 33.75% in the higher band and 39.35% in the additional band. Dividends sit on top of your other income, so the band depends on your salary too. For a full breakdown of the tax due, use the dividend tax calculator.
Company directors often combine a small salary with dividends. The £500 allowance, plus any unused Personal Allowance, means the first slice of dividends can be tax-free. Model the optimal mix with the dividend vs salary calculator or the new salary vs dividend optimiser.
The dividend allowance for 2026/27 is £500 — the first £500 of dividends is taxed at 0% in any tax band.
Yes — the £500 is taxed at 0% but still uses up part of your tax band, so it can push other dividends into a higher rate.
Yes — any unused Personal Allowance (£12,570) covers dividends first, then the separate £500 dividend allowance applies on top.
Hold shares in a Stocks & Shares ISA (tax-free, doesn't touch the allowance), stay within £500, or split shares with a spouse to use both allowances.
