How are dividends taxed in the UK?

Dividends are taxed after all your other income. The first 500 GBP is covered by the dividend allowance and is tax-free. Amounts above that are taxed at 8.75% in the basic rate band, 33.75% in the higher rate band, and 39.35% in the additional rate band.

What is the dividend allowance?

The dividend allowance is a tax-free band for dividend income, set at 500 GBP from the 2024-25 tax year (down from 1,000 GBP in 2023-24 and 2,000 GBP before that). It does not reduce the bands themselves — it just means the first 500 GBP of dividends is taxed at 0%.

How do dividends interact with my salary?

Dividends are treated as the top slice of your income. Your salary and other income use up the basic and higher rate bands first, then your dividends are stacked on top. So a higher salary pushes more of your dividends into higher tax rates.

Do I pay National Insurance on dividends?

No. Dividends are not subject to National Insurance contributions, which is one reason company directors often take a small salary plus dividends. This calculator covers income tax on dividends only, not NIC on salary.

Which tax year does this use?

This calculator uses the rates and the 500 GBP allowance that apply from 2024-25 onward, with a 12,570 GBP personal allowance and the standard England, Wales and Northern Ireland thresholds. Scottish rates differ for non-dividend income but dividend rates are UK-wide.

UK Dividend Tax Calculator

UK dividends are taxed differently from salary: there is a tax-free dividend allowance, dividends sit on top of your other income, and they use their own rate set. This calculator stacks everything in the right order to give the tax due.

How it works

Dividends are the top slice of income. Using 2024-25 thresholds:

allowance         = 500 (taxed at 0%)
basic band up to   37,700 of taxable income   → 8.75%
higher band up to  125,140                     → 33.75%
additional above   125,140                     → 39.35%

Your other taxable income fills the bands first. The taxable dividends (after the 500 GBP allowance) are then placed on top and taxed at whichever band each part falls into. The personal allowance (12,570 GBP) is applied to your total income before the bands.

Example

Other taxable income of 30,000 GBP and dividends of 20,000 GBP. After the 500 GBP allowance, 19,500 GBP of dividends is taxable. The basic rate band (37,700 GBP of taxable income) has 7,700 GBP left after the 30,000 GBP salary, so 7,700 GBP of dividends is taxed at 8.75% and the remaining 11,800 GBP at 33.75%.

Notes

This covers income tax on dividends only. National Insurance does not apply to dividends. The dividend allowance counts toward your band usage even though it is taxed at 0%, which this tool reflects.