How to calculate dividend tax
Dividends sit on top of your other income and are taxed at their own set of rates after a small tax-free dividend allowance. Which dividend rate applies depends on the band your total income lands in.
The rule
Dividend tax = (dividends − dividend allowance) × the dividend rate for your income band
Do it automatically — Dividend taxStep by step
- 1Add salary and other income to establish which band you are in.
- 2Subtract the dividend allowance from your total dividends.
- 3Stack the remaining dividends on top of your income and tax each slice at the matching dividend rate.
What trips people up
- • The dividend allowance uses up band space even though no tax is charged on it.
- • Dividends carry no social contributions, which is why owner-managers mix salary and dividends.
Common questions
Are dividends inside an ISA or retirement account taxed?
No — dividends inside a tax-sheltered account are outside this calculation entirely.
When is dividend tax paid?
Through self-assessment or your annual return, not at source.
Skip the maths
Estimate dividend tax on top of salary using each country's dividend rules.
Open the directors & investors tool