Planning dividends around the higher rate threshold
How to use the dividend tax rate bands to calculate how much you should pay yourself in dividends
Dividend tax is charged at 10.75% on dividends within the basic rate band and 35.75% in the higher rate band. The threshold between the two rates (£50,270 total income for 2026/27) represents a significant step-up in personal tax cost.
Staying within the basic rate band
To stay below the higher rate threshold, keep your total income (salary plus dividends plus any other income) below £50,270 in the tax year. The tax year runs from 6 April to 5 April.
Using the threshold to plan
If your company has retained earnings available, you may be able to take additional dividends before 5 April to use the current year allowance, or defer dividends into the next year if your income is already near the threshold. Contact us before the end of each tax year to review your dividend position. We prepare all dividend paperwork and post the Xero journal.
💡 Good to know: The £500 dividend allowance (the amount on which no dividend tax is charged) applies regardless of which rate band you are in. Make sure you are always using this allowance each year before planning further.
Not found what you're looking for?
Please get in touch and we'll be happy to help:
Email: You can submit a request using our contact form
Phone: 020 3897 2233
Live Chat: Select the live chat icon on the bottom right