Do You Need to Declare Dividend Income to HMRC?

Dividends can come from investments in UK companies, share portfolios or your own limited company.

But receiving a dividend does not automatically mean you need to complete a Self Assessment tax return.

For the 2025/26 tax year, the Dividend Allowance is £500. Dividends above your available Personal Allowance and Dividend Allowance may create a tax liability, and how you report that liability depends partly on how much dividend income you received. GOV.UK

What is a dividend?

A dividend is a distribution a company makes to its shareholders from available profits.

For many people, dividends come from:

• Shares in UK companies
• Investment portfolios
• Their own limited company
• Jointly owned investments
• Certain funds and investment products

Dividend income is taxed differently from salary, savings interest and most other forms of income.

How much dividend income is tax-free?

For 2025/26, the Dividend Allowance is £500. GOV.UK

This means you do not pay Dividend Tax on the first £500 of dividend income covered by the allowance.

However, the Dividend Allowance is a 0% tax band, rather than an amount that simply disappears from your income.

Dividend income within the allowance still forms part of your overall income when determining which tax band applies.

What are the dividend tax rates for 2025/26?

For dividends received during the tax year ending 5 April 2026, dividend income above the available allowance is taxed at:

The rate you actually pay depends on your total income, not simply the amount of dividends you receive.

Your other income matters

Imagine someone earns a salary and also receives dividends.

HMRC does not calculate the dividend position in complete isolation.

Your dividend income is added to your other income to determine which tax band applies.

That means part of your dividends could fall within one tax band while the remainder falls within another.

For example, someone already close to the higher-rate threshold could find that additional dividends are taxed partly at the higher dividend rate.

What if you receive £500 or less?

If your dividends are entirely covered by your available Personal Allowance and the £500 Dividend Allowance, there may be no Dividend Tax to pay.

HMRC says you do not need to tell it about dividends where they are within your Dividend Allowance for the tax year. GOV.UK

That does not necessarily mean you should ignore dividend records altogether.

Keep evidence of what you received so your overall tax position can be established correctly.

What if your dividends are above £500?

Going above the Dividend Allowance does not automatically mean you need a Self Assessment return.

HMRC’s current reporting rules distinguish between dividend income of up to £10,000 and amounts above £10,000.

Where you have tax to pay on dividends of up to £10,000 and you do not already submit Self Assessment, HMRC says you can report the income by contacting HMRC or asking it to adjust your tax code where appropriate. GOV.UK

What if you already complete Self Assessment?

This is straightforward.

If you already submit a Self Assessment tax return, HMRC says you must include your dividend income on the return. GOV.UK

This might apply if you’re already filing because you’re:

• Self-employed
• A landlord
• Receiving other untaxed income
• Reporting certain capital gains
• Required to file for another reason

Don’t leave dividends off simply because they are relatively small.

What if you receive more than £10,000 in dividends?

HMRC’s current guidance says dividend income over £10,000 must be reported through Self Assessment. GOV.UK

If you do not normally complete a tax return, you need to tell HMRC that you need to file one.

HMRC states that you should register for Self Assessment by 5 October following the end of the relevant tax year. GOV.UK

For dividend income received during 2025/26, that means the relevant registration deadline is 5 October 2026.

Dividends from your own limited company

This is particularly important for company directors and shareholders.

If you own a limited company, you may decide to extract money through a combination of:

Salary + dividends

But dividends are not simply another form of salary.

A company can only lawfully pay dividends where sufficient distributable profits are available, and proper records should be maintained.

From your personal tax perspective, dividends you receive from your company form part of your dividend income and need to be considered alongside your other income.

Don’t confuse company tax with your personal tax

Your company and you are separate taxpayers.

The company may pay Corporation Tax on its profits.

You may then have a personal Income Tax liability when profits are distributed to you as dividends.

The fact that the company has already paid Corporation Tax does not mean the dividend you receive is automatically free from personal tax.

This distinction is particularly important when directors decide how much money to withdraw from their companies.

Dividends do not attract National Insurance in the same way as salary

One reason dividends frequently form part of director remuneration planning is that dividends are taxed differently from employment earnings.

Ordinary dividends are not subject to employee and employer National Insurance in the same way as salary.

However, that does not mean dividends are automatically the cheapest or most appropriate way to take money from a company.

The correct salary-and-dividend strategy depends on factors including:

• Company profit
• Your other income
• Available allowances
• Corporation Tax
• National Insurance
• Pension contributions
• Other shareholders
• Your personal cash requirements

It should be considered as an overall remuneration strategy rather than simply choosing whichever headline tax rate appears lowest.

What about dividends inside an ISA?

Dividends from investments held within an Individual Savings Account (ISA) are generally tax-free.

HMRC states that you do not pay tax on dividends from shares held within an ISA. GOV.UK

These dividends therefore do not use your £500 Dividend Allowance in the same way as taxable investments held outside an ISA.

For example:

Dividends inside ISA: £2,000
Dividends from shares outside ISA: £400

The £2,000 within the ISA is generally sheltered from Income Tax.

The £400 outside the ISA is then considered under the normal dividend rules.

What about dividends inside a pension?

Investments held within registered pension arrangements can also benefit from tax advantages while held inside the pension wrapper.

You should therefore distinguish between dividends generated inside a tax-advantaged investment wrapper and dividends paid directly to you from investments held personally.

This becomes increasingly important for people with substantial investment portfolios.

What if you own shares jointly?

Jointly owned investments require the income to be attributed correctly between the owners.

Don’t simply report all of the dividend income under whichever person’s bank account receives the payment.

The underlying beneficial ownership of the shares can determine how income should be allocated.

Where significant investments are jointly owned, particularly between spouses or civil partners, it is sensible to confirm the correct treatment.

Keep your dividend vouchers

If you receive dividends, retain appropriate evidence.

Depending on the investment, this could include:

• Dividend vouchers
• Investment statements
• Broker statements
• Company dividend documentation
• Records of share ownership
• Bank records showing payments

If you own your own limited company, good dividend documentation is particularly important.

A transfer from the company bank account to your personal account does not become a dividend merely because you later describe it as one.

Don’t forget dividends from investment platforms

People increasingly hold investments across several platforms.

You might have:

• An investment app
• A traditional stockbroker
• Employee shares
• Personally held company shares
• Funds
• Shares in your own company

Small dividend payments across multiple accounts can add up.

When preparing your tax information, look at the total dividend income for the tax year, rather than considering each investment separately.

Dividend rates changed from 6 April 2026

This is particularly important when preparing the 2025/26 Self Assessment return.

The rates applicable to 2025/26 are not the same as those applying to dividends received now during 2026/27.

From 6 April 2026, the ordinary and upper dividend rates increased by two percentage points. The current 2026/27 rates are:

The Dividend Allowance remains £500. GOV.UK

So the date on which the dividend falls into a tax year can materially affect the eventual tax calculation.

Example: £5,000 of dividends in 2025/26

Suppose an individual receives £5,000 of dividends outside an ISA during 2025/26 and all taxable dividends remain within the basic-rate band.

Assuming the full £500 Dividend Allowance is available:

Total dividends: £5,000
Dividend Allowance: £500
Dividends subject to Dividend Tax: £4,500

At the 2025/26 basic dividend rate of 8.75%, that would produce Dividend Tax of:

£393.75

This is a simplified example. Your actual liability depends on your other income and allowances.

The same dividend can be taxed differently depending on your income

Take two people who each receive £5,000 of dividends.

One has relatively modest employment income.

The other already has substantial taxable income.

Their dividend tax bills may be different even though the dividend payment itself is identical.

That’s because the applicable dividend rate depends on the tax band into which the dividend income falls.

This is why dividend planning should consider your total income for the year.

Frequently Asked Questions

Do I need to tell HMRC about £300 of dividends?

If the dividends are covered by your available Dividend Allowance, HMRC says you do not need to tell it about them solely for Dividend Tax purposes. GOV.UK

Is the Dividend Allowance still £500?

Yes. The Dividend Allowance remains £500. GOV.UK

Do I need Self Assessment for £2,000 of dividends?

Not necessarily. Where tax is due on dividend income of up to £10,000 and you do not already file Self Assessment, HMRC provides other reporting methods. If you already submit a return, include your dividend income on it. GOV.UK

What happens if my dividends exceed £10,000?

HMRC says dividend income above £10,000 must be reported through Self Assessment. GOV.UK

Are dividends from an ISA taxable?

No. HMRC states that dividends from shares held within an ISA are not subject to Dividend Tax. GOV.UK

Are the dividend rates higher in 2026/27?

Yes. From 6 April 2026, the ordinary rate increased to 10.75% and the upper rate to 35.75%. The additional rate remains 39.35%. GOV.UK

Final thoughts

Dividend tax becomes complicated when you look at a dividend payment without considering everything else.

The amount of tax you pay can depend on your:

salary + dividends + savings + property income + other taxable income

For the Self Assessment return currently being prepared for 2025/26, it is also important to use the rates that applied during that year rather than the higher dividend rates introduced from April 2026.

At Merranti Accounting, we can review dividend income alongside your other income, prepare your Self Assessment return and help company directors structure withdrawals from their businesses appropriately.

Contact Merranti Accounting →

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Written by Stephen Watts ACMA

Accounting Director, Merranti Accounting

Stephen is Accounting Director and co-founder of Merranti Accounting. He has extensive commercial finance and accounting experience and works with business owners on accounting, tax, financial strategy, management information and business planning.

Meet Stephen and the Merranti team →