The tax-free dividend allowance for the 2026/27 tax year is set at £500.

Dividends are generally taxed at lower rates than salary and are not subject to National Insurance. However, the threshold for tax-free dividend income has seen significant reductions, falling from £1,000 to £500 in April 2024. For the 2026/27 tax year, the rates applied to dividend income above this allowance are 10.75% (basic), 35.75% (higher), and 39.35% (additional).