Dividends can form part of a company director’s income, but planning starts with two separate questions: can the company lawfully pay a dividend, and what personal tax will the recipient owe?
The original Advent image belongs to an earlier tax year. Any older allowance or rate shown in that graphic is historical; use the dated figures below when considering 2026/27.
What are the dividend tax rates for 2026/27?
For the tax year from 6 April 2026 to 5 April 2027, the dividend allowance is £500. Above the allowance, dividend rates are 10.75% in the basic-rate band, 35.75% in the higher-rate band and 39.35% in the additional-rate band.
The allowance is not an extra slice of tax band. Dividends still count when working out your total income and which bands apply. Salary, pension income, rental income and other earnings can therefore change the tax due.
Why the same dividend can produce different tax bills
Consider two directors receiving the same dividend. One has little other income; the other also receives substantial rental income. Their dividends may fall into different tax bands. Looking only at the dividend amount misses that wider picture.
A useful forecast starts with all expected personal income for the year, then models any proposed dividend. It should also consider cash you need to set aside for the eventual tax bill.
Check the company before making the payment
A healthy bank balance is not proof that a dividend is available. Review distributable profits and the company’s financial position. Keep the necessary decision records and dividend vouchers, and make sure the payment follows the rights attached to the shares.
Moving money first and deciding what to call it later can create a director’s loan rather than the dividend you intended. Accurate, timely bookkeeping makes that distinction easier to manage.
What should your dividend planning checklist include?
- Up-to-date accounts and available distributable profits.
- All personal income, not just money drawn from the company.
- The tax year in which the dividend will arise.
- The company’s upcoming tax, supplier and payroll commitments.
- A personal reserve for Self Assessment.
Is a calculator enough?
A calculator can help compare scenarios, but it cannot check whether a dividend is lawful or whether your records are complete. Use our salary and dividend calculator as a starting point, then review the assumptions.
Digivolve helps directors connect their company figures with their personal tax position. See our director tax return service or book a consultation.
Reviewed 2 October 2026. Rates are tax-year specific and may change. Source: GOV.UK dividend tax guidance.