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Dividend tax went up this April and most investors have not noticed

Fahad ZarCrypto tax accountant. MSc Accounting and Finance, BPP University London. Four years reconciling wallet and exchange histories for UK and US filings.

Published 25 August 2026· Reviewed against gov.uk 25 August 2026· 4 min read·Capital gains tax

If you hold shares outside an ISA, the dividends they pay are taxed at higher rates this year than last, and the change arrived with very little noise. From 6 April 2026 the basic rate on dividends is 10.75% and the higher rate is 35.75%, per GOV.UK. Last year those figures were 8.75% and 33.75%. The additional rate stays at 39.35%. On £10,000 of taxable dividends at basic rate, that is £200 more than the same dividends cost the year before.

None of this touches dividends inside an ISA or a pension. It only reaches what you hold in a general investment account, or shares in your own company.

A rate rise with no letter attached is still a rate rise. Check which band your dividends land in before January, not after.

How the £500 allowance works

Every taxpayer gets a £500 dividend allowance each year. Dividends inside it are taxed at nil, whatever band you are in. Dividends that fall within your unused Personal Allowance are not taxed either, which matters for anyone with low income and a portfolio, since up to £12,570 of income including dividends can sit inside the Personal Allowance before either tax starts.

The allowance was £5,000 as recently as 2017. It has been cut repeatedly, to £2,000, then £1,000, then £500, which is why dividend tax now reaches people with quite ordinary portfolios. A holding yielding 4% breaches the £500 allowance at £12,500 of investments.

Working out which rate you pay

Dividends sit on top of your other income. Add your total dividend income to everything else, take off the Personal Allowance, and whichever band the dividends land in sets the rate. They can straddle two bands, in which case part is taxed at 10.75% and part at 35.75%.

GOV.UK’s own worked example runs like this. Wages of £29,570 and dividends of £3,000 make £32,570 of income. The Personal Allowance takes £12,570 off, leaving £20,000, all inside the basic rate band. The wages part is taxed at 20%, £500 of the dividends are covered by the allowance, and the remaining £2,500 of dividends are taxed at 10.75%.

When you have to tell HMRC

You report dividends once they exceed both your unused Personal Allowance and the £500 dividend allowance. For most employed people with a portfolio that means Self Assessment, and if this is the first year it happens, the registration deadline is 5 October after the tax year ends. Dividends from your own company always mean a return once they pass the allowance.

If you already file for capital gains, the dividends go on the same return, and the two interact, since your gains and your dividends both stack on the same income to find their rates. Our guide to how capital gains are taxed covers the gains half of that stack.

What stays tax free

Dividends inside an ISA are not taxed and never reported. Dividends inside a pension likewise. Shares held jointly with a spouse split the income between you, which doubles the allowances in play, the same mechanism that works for the capital gains allowance. And if your only untaxed income is a small dividend stream under £500, there is nothing to do at all.