A dividend is a payment of profit from a company to its shareholders. This guide explains the £500 dividend allowance and the 2026/27 dividend tax rates.
Published July 2026 · Updated July 2026
A dividend is money a company pays out to its shareholders from profits after Corporation Tax. Owner-directors of small companies often pay themselves a small salary plus dividends, which can be tax-efficient.
Everyone gets a £500 dividend allowance (2026/27), taxed at 0%. Above it, the rate depends on your Income Tax band: 10.75% (basic), 35.75% (higher) and 39.35% (additional). Dividends can only be paid from available profits.
Only if there are retained profits available. Paying dividends without sufficient profit is unlawful.
They can be more tax-efficient at certain levels, but it depends on your circumstances. Take advice for your situation.
Source: GOV.UK ↗. This glossary is written for small business owners, so definitions are simplified. Tax rates and thresholds reflect 2026/27 UK rules and change over time. Berified does not provide accounting, tax or legal advice; always check the source or a qualified adviser.