Dividend allowance

Also called: dividend tax

Outside an ISA, the first £500 of dividends each tax year is tax-free. Above that, dividends are taxed depending on your income tax band. ISA dividends are always tax-free.

Formula

Taxable = Dividends outside ISAs − £500 · Tax = Taxable × your dividend rate

Worked example

1. Example: £800 of dividends in a general (non-ISA) account
2. Taxable = £800 − £500 = £300
3. At the 2026/27 basic rate of 10.75%: £300 × 10.75% = £32.25

Result: £32.25 tax

How to read it

Higher-rate taxpayers pay 35.75% on dividends above the allowance (2026/27). This is a guide, not tax advice.

See it with real numbers: Dividends → (free account)