Dividend tax worked example for a director
A £12,570 salary and £40,000 of dividends in 2026/27 pays £4,821.25 of dividend tax and no income tax or employee National Insurance on the salary. Take-home is £47,748.75.
The salary uses the whole Personal Allowance. The first £500 of the dividend is the dividend allowance and it uses up £500 of the basic-rate band. The next £37,200 of dividend is still in the basic-rate band and is taxed at 10.75%, which is £3,999.00. The remaining £2,300 is in the higher-rate band at 35.75%, which is £822.25. Rates for 6 April 2026 to 5 April 2027 are on GOV.UK tax on dividends.
The GOV.UK example
GOV.UK’s own 2026/27 example is £29,570 of wages and £3,000 of dividends. Taxable wages are £17,000 at 20%, which is £3,400.00. The dividend splits into £500 at nil and £2,500 at 10.75%, which is £268.75. This calculator returns that £268.75. Employee National Insurance on the wages is £1,360.00, which the GOV.UK example does not show because it is only illustrating the dividend.
2026/27 dividend rates
| Band, after the salary has used it | Rate above the £500 allowance |
|---|---|
| Basic rate, the first £37,700 of taxable income | 10.75% |
| Higher rate, up to £125,140 of taxable income | 35.75% |
| Additional rate | 39.35% |
The dividend allowance uses the band. It is not a tax-free amount stacked on top of the band. Dividends that sit inside the Personal Allowance, because the salary was below £12,570, are not taxed and do not use the £500 allowance.
Scotland
Dividend rates do not change in Scotland. A £12,570 salary uses the Personal Allowance in both nations, so this default result is the same in Scotland. Raise the salary and the salary tax changes. A £30,000 salary and £20,000 of dividends pays £3,486.00 of income tax in England, Wales and Northern Ireland and £3,451.07 in Scotland. Dividend tax is £2,096.25 in both, because £19,500 of the dividend is at 10.75% after the £500 allowance. Take-home is £43,023.35 outside Scotland and £43,058.28 in Scotland. Scottish tax calculator.
Salary instead of a dividend
Taking the £12,570 plus £40,000 entirely as salary would leave £41,048.00 after income tax and employee National Insurance, against £47,748.75 from the salary-and-dividend split. That comparison is personal tax only. The company pays corporation tax on profit before it can pay a dividend, and it pays employer National Insurance on salary above £5,000. The IR35 day rate calculator starts from the company revenue and does both.
Frequently asked questions
What is the dividend tax rate for 2026/27?
From 6 April 2026 to 5 April 2027 the dividend allowance is £500. Dividends above it are taxed at 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band. The rates are the same in Scotland.
How much dividend tax is due on a £12,570 salary and £40,000 of dividends?
The salary uses the £12,570 Personal Allowance, so it pays no income tax and no employee National Insurance. Of the £40,000 dividend, £500 is the dividend allowance, £37,200 is taxed at 10.75% (£3,999.00) and £2,300 at 35.75% (£822.25). Dividend tax is £4,821.25. Take-home is £47,748.75.
Does a dividend replace corporation tax?
No. This calculator taxes the salary and the dividend the person receives. The company has already paid corporation tax before it pays the dividend. The limited-company comparison on the IR35 day rate calculator starts from revenue and deducts corporation tax.