UK dividend tax explained

The last few years have seen dividend tax rates steadily rise. At the same time investors have seen a massive reduction in the already miserly tax-free dividend allowance. Let’s update ourselves on where dividend tax rates and allowances now stand. We’ll then briefly consider how we got here, and what you can do about it. Dividend tax rates and allowances The rate of tax you’ll pay on your dividends depends on your income tax band. UK dividend tax rates are currently: Basic-rate taxpayers: 10.75% Higher-rate taxpayers: 35.75% Additional-rate taxpayers: 39.35% The basic and higher rates were increased on 6 April 2026. Note that depending on your total earnings – and where it comes from – you could pay tax at more than one rate on your income. Importing note: we’re talking here about dividends paid outside of tax shelters. Dividends paid within ISAs and pensions are ignored with respect to tax. Are you adding up your dividends for your tax return? Don’t include dividends paid in ISAs or…