Do I Pay Tax on Dividends From My Own Limited Company?
Updated July 2026 · 5 min read · Free calculator inside
Yes — dividends you pay yourself from your own limited company are taxed as personal income, separately from any salary you draw. They use their own tax-free allowance and their own set of rates, which are lower than Income Tax rates on salary — a major reason many director-shareholders pay themselves a mix of a small salary plus dividends.
Estimate your dividend income and tax
Skip the maths — get an instant, up-to-date figure with our free calculator.
Open the Dividend Income Calculator →The dividend allowance and rates (2026/27)
| Band | Rate on dividends |
|---|---|
| Dividend allowance | £500 tax-free |
| Basic rate | 8.75% |
| Higher rate | 33.75% |
| Additional rate | 39.35% |
Which rate applies depends on your total income (salary + dividends), stacked with your other income first.
Why dividends are separate from your salary
Your salary is taxed through PAYE with Income Tax and National Insurance. Dividends are paid from the company's post-tax profits (the company has already paid Corporation Tax on that profit) and are taxed on you personally at the lower dividend rates, with no National Insurance charged on dividends at all. This is why many director-shareholders draw a small salary — often around the NI threshold — and take the rest of their income as dividends.
What to watch for
- You can only pay dividends from retained, post-tax profit — not from money the company hasn't actually earned.
- The £500 dividend allowance is separate from your £12,570 personal allowance, but dividend income still counts towards which tax band you are in overall.
- HMRC expects a dividend voucher and board minutes for each dividend payment as evidence it was properly declared.
Frequently Asked Questions
How much can I pay myself in dividends tax-free?
The dividend allowance is £500 for 2026/27. If you have no other income, you could also use your unused £12,570 personal allowance against dividends first, but most director-shareholders also draw a salary, which uses up that allowance.
Do dividends count as income for a mortgage application?
Yes, lenders generally accept dividend income as evidence of earnings for self-employed directors, usually averaged over 1–3 years of accounts.
Is it better to take a salary or dividends from my company?
A combination is usually most tax-efficient: a small salary (often around the NI threshold, to preserve State Pension qualifying years) plus dividends for the rest, since dividends avoid NI and are taxed at lower rates than salary.
Estimate your dividend income and tax
Skip the maths — get an instant, up-to-date figure with our free calculator.
Open the Dividend Income Calculator →Related Guides
How Is National Insurance Calculated in the UK?
A clear 2026/27 guide to UK National Insurance: the £12,570 threshold, the 8% and 2% employee rates, what employers pay, and worked examples of your monthly deduction.
How to Calculate Your Take-Home Pay in the UK
Work out your UK take-home pay for 2026/27 — income tax bands, the £12,570 personal allowance, National Insurance, and what actually lands in your bank account.
⚠️ Disclaimer: This guide is for general information only and does not constitute financial, tax, or legal advice. Rates and thresholds can change — always check the latest figures on GOV.UK and consult a qualified professional before making decisions.