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There are three steps to calculate the tax you owe on dividends.
Let’s start at the beginning. What is income tax? It’s basically the tax you pay on your wages. The majority of us has to pay it if we earn more than the personal allowance.
The income tax rates in the 2025/26 tax year 👇
| Income | Tax rate | Tax band |
| Up to £12,570 | 0% | Personal allowance |
| £12,571 to £50,270 | 20% | Basic rate |
| £50,271 to £125,140 | 40% | Higher rate |
| over £125,141 | 45% | Additional rate |
Next, dividends. Use the table below to work out the tax rate you’ll be charged on your dividend income.
Dividend tax rates in the 2025/26 tax year. The dividend allowance is currently £500 👇
| Income | Tax band | Tax rate |
| Up to £12,570 | Personal allowance | 0% |
| £12,571 – £50,270 | Basic rate | 8.75% |
| £50,271 – £125,140 | Higher rate | 33.75% |
| £125,140+ | Additional rate | 39.35% |
Not sure whether you need to file a tax return or report your dividend income? No worries! Get a professional, accredited accountant to help guide you in the right direction. Plus, they can help you with your tax efficiency. Book your tax advice consultation today for a low, one-off fee.
Rules are simple here:
To figure out exactly how much tax you’ll pay, you can use our dividend tax calculator.
You can either call HMRC on 0300 200 3300 to take this tax from your salary or pension, or include it on your Self Assessment tax return.
Tax on dividends is calculated pretty much the same way as tax on any other income.
The biggest difference is the tax rates – instead of the usual 20%, 40%, 45% (depending on your tax band), you’ll be taxed at 8.75%, 33.75%, and 39.35%.
The numbers look strange but the reason is simple: the company paying you those dividends already paid corporate tax, so you’re paying the difference.
This is mostly relevant if you own your company and you’re trying to decide the best way to pay yourself: dividends or salary. Keep in mind that if you pay from your salary, you also need to pay National Insurance.
In your case you earned £3,000 in dividends and £29,000 in other income (this can be salary, rent, etc.).
You don’t pay any dividend tax on the first £500 you make in dividends.
You pay 8.75% on the next £2,500
Call HMRC on 0300 200 3300 so they can change your tax code – you’ll pay the dividend tax through your salary or pension.
If you normally file a tax return, you can also pay dividend tax through it.
Get an accredited accountant to sort and file your Self Assessment tax return to declare your dividend tax liabilities to HMRC. Use TaxScouts for a stress-free process and a low, one-off price.
Or see our Guides, Calculators or Taxopedia
