With a £12,570 salary you'll owe £4,821.25 on the dividends, and the bill you pay in January 2028 will be £7,231.87 because the first payment towards the next year is due at the same time.
A director with a £12,570 salary who takes £40,000 of dividends in 2026/27
| Salary, covered by your personal allowance | £12,570.00 |
| Dividends | £40,000.00 |
| First £500 at 0% | £0.00 |
| Next £37,200 at 10.75% | £3,999.00 |
| Last £2,300 at 35.75% | £822.25 |
| Tax on your dividends | £4,821.25 |
The £12,570 salary uses the whole personal allowance. All assumptions and rates
Where £40,000 of dividends ends up
Assumptions and rates
- The £12,570 salary uses the whole personal allowance.
- No other income, and dividends are from a UK company.
- Dividend rates and bands are the same across the UK, including Scotland.
- Basic rate band £37,700
- £500 dividend allowance, taxed at 0% but using basic rate band
- Dividend rates 10.75% (basic), 35.75% (higher), 39.35% (additional)
Why is some of it taxed at 35.75%?
Because the basic rate band holds £37,700 and the salary has already used the personal allowance. The first £37,700 of dividends sits in the basic rate band, and the last £2,300 spills over into the higher rate band.
Does the £500 allowance save me £500?
No. It saves the tax on £500, which at the basic rate is £53.75. It also uses up £500 of your basic rate band, so it does not push the higher rate threshold any further out.
How much could I take before reaching 35.75%?
With a £12,570 salary and no other income, £37,700 of dividends. The tax on that would be £37,200 at 10.75%, which is £3,999.00. Every pound of dividend above £37,700 costs 35.75p in tax until your income reaches £100,000.
When do I pay it?
Through Self Assessment. If this is your first year with a bill, you pay £4,821.25 plus a first payment on account of £2,410.62 on 31 January 2028, which is £7,231.87. The second payment on account, £2,410.63, is due on 31 July 2028. Why is my first January tax bill so big? explains why.
What changed from 2025/26?
The basic and higher dividend rates each went up by two percentage points, from 8.75% and 33.75% to 10.75% and 35.75%. The additional rate stayed at 39.35%. The same £40,000 in 2025/26 would have cost £4,031.25.
I live in Scotland. Is this different?
The dividend tax is the same. Scottish income tax rates apply to salary and other non-savings, non-dividend income, while dividends use the UK rates and bands shown here.
Can my company pay any dividend it likes?
No. Dividends can be paid from profits left after corporation tax, including profits kept from earlier years. A dividend paid without enough profit behind it can be treated as a loan from the company, which brings its own tax. What happens if my director's loan account is overdrawn? covers that.
What this doesn’t cover
- Income over £100,000, where the personal allowance is reduced.
- Other income such as rent, interest or self-employed profit.
- Dividends held inside an ISA.
- Corporation tax paid by the company before the dividend.
- Pension contributions, which extend the basic rate band.
Common questions
£500. Dividends inside it are taxed at 0%, but they still use up your tax bands.
If you already file a return, the dividends go on it. If dividends are your only untaxed income, HMRC's guidance sets out when they mean you need to register.
A short email before each deadline that costs money to miss, and when a new guide goes up.