If you invest in shares or own funds that pay dividends, understanding the dividend tax allowance helps you keep more of your returns.
Dividend Allowance 2026/27
Everyone gets a dividend allowance of £500 per year (2026/27). This is tax-free regardless of your other income. Any dividends above this are taxed at your marginal rate.
- Dividend allowance: £500 per year
- Taxed at marginal rate above allowance
- Doesn't use up your personal allowance
Dividend Tax Rates
Once you exceed the allowance, dividends are taxed at your income tax band. For 2026/27, basic rate taxpayers pay 10.75%, higher rate payers 35.75%, and additional rate payers 39.35%.
Do I pay tax on dividends in an ISA?
No. All dividends from ISA investments are completely tax-free. This makes ISAs especially valuable for dividend investors.
Can I carry forward unused dividend allowance?
No. The dividend allowance cannot be carried forward. If you don't use it, you lose it.
- dividend
- tax allowance
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- UK