When dividends need to be reported to HMRC

The shares came from a workplace scheme years ago, or from a small inheritance, and the dividends land in a bank account twice a year without much ceremony. Unlike wages, nobody takes tax off them on the way. So when the payments grow, the responsibility for telling HMRC sits with the person who receives them. Many people only find this out when they read the rules for the first time.

The dividend allowance

GOV.UK says everyone gets a dividend allowance of £500 each year, and you only pay tax on dividend income above it. Dividends can also be covered by any part of your £12,570 Personal Allowance that your other income has not used up. GOV.UK says you need to report dividends to HMRC if they are over both your unused Personal Allowance and the dividend allowance.

The £500 is a 0% band rather than a deduction. GOV.UK’s own worked example adds total dividend income, including the £500, to other income when working out which tax band you are in.

Dividend tax rates for 2026/27

For the tax year from 6 April 2026 to 5 April 2027, dividends above the allowance are taxed at:

Rates as set out on GOV.UK and in HMRC’s Budget 2025 policy paper. The dividend rates apply across the UK.

The increase was announced in the Budget on 26 November 2025 and took effect from April 2026. The additional rate did not change. A separate rise in the tax rates on savings interest follows from April 2027, explained in when interest on savings starts to be taxed; dividends are not part of that second step.

So when the payments grow, the responsibility for telling HMRC sits with the person who receives them.

Dividends inside an ISA

GOV.UK says you do not pay tax on dividends from shares in an ISA. They do not use up the £500 allowance and do not need to be reported. For someone holding shares directly, that is the main practical difference between an ordinary share account and a stocks and shares ISA. Our guide to how much you can put into ISAs this year, and the different kinds sets out the £20,000 limit for 2026/27.

How to report, depending on the amount

GOV.UK splits the reporting rules at £10,000 of dividends.

• Within your allowances. You do not need to tell HMRC if your dividends are within the dividend allowance for the tax year (or, as above, covered by unused Personal Allowance).
• Up to £10,000, no Self Assessment. Tell HMRC after the tax year ends on 5 April and before 5 October. GOV.UK gives two ways: ask HMRC to update your tax code, so the tax is taken from your wages or other PAYE income, or contact the HMRC helpline.
• Up to £10,000, already in Self Assessment. Report the dividends on your tax return by the usual deadline.
• Over £10,000. You need to fill in a Self Assessment return. If you do not already, you must tell HMRC by 5 October, which you do by registering for Self Assessment.

Where the tax is collected through PAYE, it shows up as an adjustment in your tax code. Our explainer on what the letters and numbers in your tax code are telling you shows how to read that change.

The same logic shifts at the edges. If Claire’s salary had been £49,000, part of her dividends would sit above the £50,270 higher rate threshold and be taxed at 35.75%. If she had received £400 of dividends, the allowance would have covered them and there would be nothing to report.

Owner-directors and small company shareholders

GOV.UK’s dividend guidance has no separate rule for people who take dividends from their own limited company. The same £500 allowance, the same rates and the same £10,000 reporting line apply. Anyone who already files Self Assessment, for any reason, reports the dividends on that return. Couples who both hold shares each have their own £500 allowance; how other allowances can be shared between spouses is covered in the Marriage Allowance for married couples and civil partners.

Who this matters for, and what to check

• Anyone holding shares or funds outside an ISA whose dividends now exceed £500 a year.
• Employees with shares from a workplace share scheme, whose dividends are not taxed through payroll unless HMRC has adjusted their tax code.
• People near the £50,270 higher rate threshold, where dividends can be taxed at 35.75%.
• Anyone whose dividends approach £10,000, the point at which Self Assessment is needed.
• Households that also earn savings interest, which has its own separate allowances.

Putting it together

For 2026/27 the first £500 of dividends is tax-free, and dividends above that are taxed at 10.75%, 35.75% or 39.35%. Dividends in an ISA are not taxed at all. If your dividends exceed your allowances, you tell HMRC by 5 October after the tax year, either through your tax code or the helpline, or through Self Assessment where dividends are over £10,000 or you already file.