WhichBrokerThe short answer
In the 2026/27 tax year you can receive £500 of dividends before paying tax on them, according to GOV.UK. Above that, dividends are taxed at 10.75% if they fall in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band. The basic and higher rates went up by two percentage points on 6 April 2026. Dividends from shares held in a stocks and shares ISA are not taxed at all, whatever the amount, which is why an ISA is the first place most people hold dividend-paying shares. All figures as of October 2026.
How is dividend tax worked out?
Dividends are taxed after your other income, and three things are applied in order.
- Personal Allowance. GOV.UK says you do not pay tax on dividend income that falls within your Personal Allowance, which is £12,570 for 2026/27. Your wages, pension and other income use it up first, so for most employees it is already gone.
- Dividend allowance. You only pay tax on dividends above £500 a year.
- The rate depends on your band. GOV.UK says to work out your band, add your total dividend income to your other income. You can pay tax at more than one rate if your dividends straddle two bands.
The £500 allowance is a 0% tax rate, not a deduction. Dividends covered by it still count as income when HMRC decides which band the rest of your dividends fall into. That matters when you are close to the higher rate threshold.
What are the dividend tax rates and bands for 2026/27?
| Income band (England, Wales, NI) | Dividend rate 2026/27 | Dividend rate 2025/26 | |
|---|---|---|---|
| Dividend allowance | First £500 of dividends | 0% | 0% |
| Basic rate | Taxable income up to £37,700 | 10.75% | 8.75% |
| Higher rate | £37,701 to £125,140 | 35.75% | 33.75% |
| Additional rate | Over £125,140 | 39.35% | 39.35% |
Sources: GOV.UK, “Tax on dividends” and “Income Tax rates and allowances”. Bands are for taxable income after the Personal Allowance. The Personal Allowance is reduced by £1 for every £2 of income above £100,000 and can fall to nil, which is why the effective rate on income between £100,000 and about £125,000 is higher than the headline rates.
How much dividend tax will I pay? Four worked examples
The sums below use the 2026/27 rates and the £12,570 Personal Allowance. Each was computed with a script and cross-checked against the example on GOV.UK.
| Your situation | Other income | Dividends | Dividend tax |
|---|---|---|---|
| Low income, no job | £0 | £5,000 | £0 |
| Basic-rate employee | £29,570 | £3,000 | £268.75 |
| Higher-rate employee | £50,000 | £5,000 | £1,608.75 |
| Higher-rate, large pot | £60,000 | £10,000 | £3,396.25 |
The basic-rate employee is GOV.UK’s own example. Total income is £32,570. After the £12,570 Personal Allowance, £20,000 is taxable, which sits in the basic rate band. The first £500 of dividends is free and the other £2,500 is taxed at 10.75%, giving £268.75. Under the 2025/26 rate of 8.75% the same dividends would have cost £218.75, so the increase is £50.
The higher-rate employee has £50,000 of wages, which already fills the basic rate band. Of £5,000 in dividends, £500 is covered by the allowance and the remaining £4,500 is taxed at 35.75%, giving £1,608.75.
The straddling case. Take £35,000 of wages and £20,000 of dividends. Wages use up the Personal Allowance and leave £22,430 of taxable income. The first £500 of dividends is free, the next £14,770 fills the rest of the basic rate band and is taxed at 10.75% (£1,587.78), and the remaining £4,730 is taxed at 35.75% (£1,690.97). The total is £3,278.75.
With no other income, the first £12,570 of dividends is covered by the Personal Allowance, so £5,000 is tax-free even before the dividend allowance is used.
These are illustrations of the rules, not tax advice. Pension contributions, Gift Aid, the marriage allowance and student loan repayments can change your own numbers.
Do dividends in an ISA count?
No. GOV.UK says dividends from shares held in an ISA are not taxed. Our guide to the best stocks and shares ISA platforms covers the ISA wrapper in more detail, including the £20,000 limit for 2026/27 that is shared across every ISA you hold.
Two practical points follow.
- ISA dividends do not touch your £500 allowance. You can keep using the allowance for shares you hold outside an ISA.
- Moving shares into an ISA is not free of tax. If you sell shares outside an ISA to rebuy them inside one, that sale can trigger capital gains tax. That is a separate tax, with its own allowance.
An ISA also removes the paperwork. You do not report ISA dividends to HMRC and you do not track them. Outside an ISA, a modest portfolio can generate dividends over £500 surprisingly quickly: at a 4% yield, about £12,500 of dividend shares produces £500 a year.
How do you report dividends to HMRC?
According to GOV.UK, the route depends on how much you receive above the allowance.
- Within the allowance. You do not need to tell HMRC.
- Up to £10,000 and you file Self Assessment. Report the dividends on your tax return.
- Up to £10,000 and you do not file a return. Tell HMRC after the end of the tax year (5 April) and before 5 October. You can ask for your tax code to be changed so the tax is taken from your wages or pension.
- Over £10,000. You must complete a Self Assessment tax return. If you are not registered, tell HMRC by 5 October after the tax year ends by registering for Self Assessment.
Outside an ISA the tax is yours to declare, which is another reason dividend-paying shares tend to suit an ISA.
What about dividends from US and other foreign shares?
If you hold US shares, the US takes its cut first. With a W-8BEN form on file, which most platforms ask for when you open an account, US dividends normally have 15% withheld under the UK-US treaty, as covered in our guide to the cost of buying US shares from the UK. Inside an ISA the US withholding still applies, but there is no further UK tax.
Outside an ISA, GOV.UK says UK residents normally pay UK tax on foreign income, and that you may be able to claim relief where you have been taxed in more than one country. Foreign dividends usually need to be reported in a Self Assessment return. Our Trading 212 review shows how one major platform handles dividends and share lending, and the guide to Trading 212 fees covers what it charges.
Where does the ISA fit against the dividend allowance?
The £500 allowance is small compared with the £20,000 ISA allowance. A basic-rate taxpayer with £5,000 of dividends outside an ISA pays about £484 at 10.75% (the £4,500 above the allowance); a higher-rate taxpayer pays about £1,609. The same dividends inside an ISA cost nothing.
That does not mean everyone should use an ISA for everything. The £20,000 limit is annual, and the ISA is a wrapper, not a type of investment. What is inside it still carries risk, and what you invest in is a separate decision. If you want to hold cash tax-free instead, see the Trading 212 Cash ISA guide, noting that from 6 April 2027 the cash ISA limit for under-65s falls to £12,000 within the overall £20,000.
Want a figure for your own income? Use our dividend calculator.
Sources
- GOV.UK, Tax on dividends, checked October 2026.
- GOV.UK, How to report tax on dividends, checked October 2026.
- GOV.UK, Income Tax rates and allowances, checked October 2026.
- GOV.UK, Individual Savings Accounts and how ISAs work, checked October 2026.
- GOV.UK, Foreign tax credit relief, checked October 2026.
Questions fréquentes
How much dividend income is tax-free in the UK in 2026/27?
The first £500 of dividends each tax year is covered by the dividend allowance, according to GOV.UK. On top of that, dividends that fall inside your £12,570 Personal Allowance are not taxed, but only if your other income has not already used it up. Dividends held inside a stocks and shares ISA are tax-free without any limit beyond the £20,000 annual ISA allowance.
What are the UK dividend tax rates for 2026/27?
For 6 April 2026 to 5 April 2027, GOV.UK lists 10.75% for dividends in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band. These apply only to dividends above the £500 allowance. The basic and higher rates are two percentage points above 2025/26, when they were 8.75% and 33.75%.
Do I pay tax on dividends held in an ISA?
No. GOV.UK says dividends from shares held in an ISA are not taxed, and you do not report them to HMRC. They also do not count towards your £500 dividend allowance, so using an ISA leaves the allowance free for dividends from shares you hold outside one. The ISA limit for 2026/27 is £20,000 across all your ISAs.
Do I have to tell HMRC about my dividends?
Only if they go over the allowance. GOV.UK says you do not need to tell HMRC if your dividends are within the dividend allowance. If you file Self Assessment, report them there. If you do not, tell HMRC after 5 April and before 5 October following the tax year. For up to £10,000 of dividends you can ask for your tax code to be changed instead.
Are US dividends taxed twice for UK investors?
Not in full. US dividends are normally taxed at source first, and a platform W-8BEN form normally brings that withholding down to 15% under the UK-US treaty. GOV.UK says UK residents normally pay UK tax on foreign income too, and you may be able to claim relief for the tax already paid. Inside an ISA the US withholding still applies, but UK tax does not.