Dividend tax rates 2025/26: worked examples for company directors

Summary

Updated October 2025 — Sources: GOV.UK dividend tax rates, HMRC Self Assessment helpsheets.

Dividend tax in 2025/26 uses its own rate bands after the £500 dividend allowance. Understanding how dividends stack on top of salary is essential for limited company directors planning profit extraction.

1. Rates and bands

Band	Rate	Applies when
Allowance	0%	First £500 of dividends
Basic	8.75%	Within basic-rate band (£12,571–£50,270)
Higher	33.75%	Within higher-rate band (£50,271–£125,140)
Additional	39.35%	Above £125,140

2. Example A — £30,000 dividends, no salary

Personal allowance covers £12,570. Dividend allowance covers £500. Remaining £16,930 taxed at 8.75% = £1,481 dividend tax. Net cash ≈ £28,519.

3. Example B — £12,570 salary + £25,000 dividends

Salary uses personal allowance entirely. Basic band has £37,700 remaining. All £25,000 dividends fall in basic band at 8.75% = £2,188 dividend tax (after £500 allowance).

4. Example C — £50,270 salary + £30,000 dividends

Salary fills basic band. £30,000 dividends: first portion at 8.75%, remainder at 33.75%. Total dividend tax ≈ £7,800. Higher-rate extraction is materially more expensive.

5. Sources

• GOV.UK — Tax on dividends
• GOV.UK — Income Tax rates