On 6 April 2026, the UK raised its tax on dividends. The lowest rate rose from 8.75% to 10.75%.
A dividend is cash a company pays to its shareholders. In the UK and the US, dividends are taxed as income, but each country has its own allowances and rates. This guide sets out the basics of both for the current tax year, using official pages from GOV.UK and the US Internal Revenue Service (IRS). It is general information, not tax advice.
How are dividends taxed? In both the UK and the US, dividends count as taxable income. How much tax you pay depends on your total income and on each country's allowances and rates.
UK, 2026/27 tax year (6 April 2026 to 5 April 2027): the first £500 of dividends is tax-free. So is any part of the £12,570 tax-free Personal Allowance that your other income has not used.
Above that, UK dividends are taxed at 10.75%, 35.75% or 39.35%, depending on your income. The two lower rates each rose by 2 percentage points in April 2026, so 8.75% became 10.75%.
US, 2026: dividends from US companies (and some foreign ones) can count as "qualified" if you have held the shares long enough. Qualified dividends are taxed at 0%, 15% or 20%. Non-qualified dividends are taxed at the same rates as wages, from 10% to 37%.
Are dividends taxable?
Yes. In both countries, dividends are taxable income. A dividend is a cash payment from a company's profits, a fixed amount for each share you own. We explain how it works in What Is a Dividend?
Some accounts change the rules. In a tax-free account, dividends are never taxed. In a tax-deferred account, the tax waits until you take the money out. We cover these at the end.
UK dividend tax rates for 2026/27
The UK tax year runs from 6 April to 5 April. HM Revenue and Customs (HMRC) collects the tax.
UK Income Tax works in bands. The first £12,570 of income is tax-free. This is the standard Personal Allowance, which shrinks for incomes above £100,000. Income above it is taxed at 20% up to £50,270. This is the basic-rate band. Above it comes the higher-rate band, at 40%. Above £125,140 comes the additional-rate band, at 45%.
Dividends are added to your other income to find your band. Then three rules apply:
Dividends that fit inside an unused part of your Personal Allowance are tax-free. GOV.UK puts it this way: "You do not pay tax on any dividend income that falls within your Personal Allowance."
The next £500 of dividends is tax-free. This is the dividend allowance.
Dividends above that are taxed at the dividend rate for your band.
Source: GOV.UK; HMRC
The chart shows the dividend rates before and after 6 April 2026. The basic rate rose from 8.75% to 10.75%, a rise of 2 percentage points. The higher rate rose from 33.75% to 35.75%. The additional rate stayed at 39.35%. These rates apply across the whole UK, including Scotland.
So £1,000 of dividends above the allowances now costs £107.50 in tax at the basic rate. It costs £357.50 at the higher rate and £393.50 at the additional rate.
GOV.UK gives a worked example for 2026/27. You earn £29,570 in wages and get £3,000 in dividends, a total of £32,570. The wages use up the whole £12,570 Personal Allowance. So £17,000 of wages is taxed at 20%. Of the dividends, £500 is tax-free under the dividend allowance. The other £2,500 is taxed at 10.75%, which is £268.75. At last year's 8.75% rate, it would have been £218.75. The rise costs £50 a year in this example.
The UK dividend allowance, from £5,000 to £500
The £500 dividend allowance used to be much larger.
Source: HMRC
The allowance started at £5,000 in 2016/17. It has been cut three times since. It is £500 in 2026/27, which is 90% smaller than when it began.
US dividend tax rates for 2026: qualified and non-qualified
The IRS is the US tax authority. The figures here are federal tax for 2026, for the filing status the IRS calls "single". It covers unmarried people who do not qualify for another status. State taxes and other filing statuses have different numbers.
The IRS splits dividends into two kinds:
Qualified dividends pass the IRS tests below. They are taxed at 0%, 15% or 20%.
Non-qualified dividends fail the tests. They are taxed at the same rates as wages, from 10% to 37%.
The tests are set out in IRS Publication 550. The main two are about the company and about how long you held the shares. The company must be a US company or a qualifying foreign one. For the holding test, start from the ex-dividend date. That is the first day a buyer of the share no longer gets the next dividend. Count a window of 121 days that starts 60 days before it. You must have held the shares for more than 60 days of that window.
The rate depends on your taxable income. That is your income after the deductions the US tax return allows.
Source: IRS (Rev. Proc. 2025-32); YX Insights
The chart compares two rates at each level of taxable income. The blue line is for qualified dividends. The orange line is for non-qualified dividends. Dividends sit on top of other income, so your total taxable income sets the rate. Qualified dividends pay 0% up to $49,450 of taxable income. They pay 15% up to $545,500 and 20% above that. Non-qualified dividends pay the wage rates, which rise in steps from 10% to 37%.
Take someone filing as single with $80,000 of taxable income, of which $3,000 is dividends. If the dividends are qualified, the tax on them is 15%, or $450. If they are non-qualified, it is 22%, or $660. The difference is $210.
A UK resident who owns US shares, such as Microsoft, pays US tax first. The US withholds 30% of the dividend by default. That means it takes the tax before the dividend reaches you. Under the UK–US tax treaty, the rate falls to 15%. To get it, you file a US form called the W-8BEN.
On 100 Microsoft shares, the $0.98 dividend due on 10 December 2026 comes to $98. At the 15% treaty rate, $14.70 is withheld, so $83.30 arrives. The dividend is still UK income. GOV.UK says you can usually claim Foreign Tax Credit Relief, which reduces the UK tax to allow for tax already paid abroad.
How to report dividends and accounts with different rules
In the UK:
No report is needed while your dividends stay within your unused Personal Allowance and the £500 dividend allowance.
If you file a Self Assessment tax return, add the dividends there. Self Assessment is the yearly tax return you file with HMRC yourself.
If you do not file one and your dividends are up to £10,000 a year, you can phone the HMRC helpline or ask HMRC to update your tax code. Your tax code tells your employer or pension provider how much tax to take from your pay.
Over £10,000 a year, you must file a Self Assessment tax return.
Dividends on shares in an Individual Savings Account (ISA) are tax-free. In 2026/27, you can put up to £20,000 a year into ISAs.
In the US:
Each company or fund that pays you $10 or more in a year sends a tax form. It shows your total dividends and the qualified part.
Higher earners may pay an extra 3.8% on investment income, called the Net Investment Income Tax. For single filers, it starts above $200,000 of income, on the IRS's measure.
In a traditional Individual Retirement Account (IRA), tax on dividends waits until you withdraw the money.
So how are dividends taxed?
Dividends are taxed as income in both countries. In the UK, the first £500 is tax-free, as is any unused Personal Allowance. Above that, the rate follows your Income Tax band: 10.75%, 35.75% or 39.35%. In the US, qualified dividends pay 0%, 15% or 20%. Non-qualified dividends pay the same rates as wages.
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