The 2025/26 Self Assessment return covers income received between 6 April 2025 and 5 April 2026. For limited company directors who take dividends, the main challenge is ensuring that every payment is lawful, documented and reported in the correct tax year.
The dividend allowance is £500 for 2025/26. This is unchanged from 2024/25, although it is considerably lower than it was several years ago. The dividend tax rates for 2025/26 remain 8.75% for dividends falling within the basic-rate band, 33.75% within the higher-rate band and 39.35% within the additional-rate band.
The deadline for filing the 2025/26 return online is 31 January 2027. Paper returns must normally reach HMRC by 31 October 2026. Any balancing payment for 2025/26, together with the first payment on account for 2026/27 where applicable, is also due by 31 January 2027.
The Dividend Allowance for 2025/26
The dividend allowance is a 0% tax band rather than an additional personal allowance. Dividend income within it still forms part of your total income and can affect your tax band, personal allowance and entitlement to income-related reliefs.
| Tax year | Dividend allowance |
|---|---|
| 2022/23 | £2,000 |
| 2023/24 | £1,000 |
| 2024/25 | £500 |
| 2025/26 | £500 |
The allowance did not fall again in 2025/26. However, directors who have not reviewed their tax position since 2022/23 may still face a larger bill because the allowance is now £1,500 lower than it was then.
For example, suppose all £30,000 of a director’s dividends fall within the higher-rate dividend band:
| 2023/24 | 2025/26 | |
|---|---|---|
| Dividends received | £30,000 | £30,000 |
| Dividend allowance | £1,000 | £500 |
| Dividends taxed at 33.75% | £29,000 | £29,500 |
| Dividend tax | £9,787.50 | £9,956.25 |
The additional tax caused by the allowance reduction in this example is £168.75. The actual calculation may differ if some dividends fall within the basic-rate or additional-rate band.
Working with an accountant Stockport businesses trust for personal tax support means your expected liability can be calculated before the payment deadline.
How Dividends Are Reported
UK dividends are reported in the dividends section of the Self Assessment return. This includes dividends from your own limited company and taxable dividends from other UK companies, shares and investment funds held outside an ISA.
Foreign dividends may need to be reported in the foreign income section, particularly where foreign tax has been deducted or Foreign Tax Credit Relief is being claimed.
If you already complete a Self Assessment return, you must include your dividend income even where it is covered by the £500 allowance and no dividend tax is payable. If you do not normally file a return, dividend income above £10,000 generally requires Self Assessment. Lower amounts may be reported to HMRC through another available method.
Dividends from investments held within an ISA are exempt from Income Tax and do not need to be entered on the return.
Which Tax Year Does a Dividend Belong To?
Your company’s accounting year does not determine the tax year in which you personally report a dividend.
For an interim dividend, the relevant date is normally when it is paid or otherwise placed unreservedly at the shareholder’s disposal, such as when it is credited to a director’s loan account and can be withdrawn.
A final dividend normally becomes taxable when it is due and payable under the shareholder resolution. This may be the declaration date, although the resolution can specify a later payment date.
This distinction matters around 5 April. A dividend declared near the end of the tax year may not necessarily fall into that year if the shareholder did not become entitled to it until later. Your board minutes, dividend voucher, bank records and loan account entries should all support the same treatment.
The Importance of Proper Dividend Documentation
Every dividend payment must be supported by appropriate company records. The company should:
- Confirm that sufficient distributable profits are available.
- Hold a directors’ meeting or record a written directors’ decision.
- Keep minutes of the decision.
- Prepare a dividend voucher.
- Give the shareholder a copy of the voucher.
- Keep a copy with the company’s records.
- Pay the dividend in accordance with the rights attached to the relevant shares.
A dividend voucher should show the date, company name, shareholder’s name and amount of the dividend.
These are not merely administrative formalities. A company must not distribute more than its available profits from current and previous financial years. A payment labelled as a dividend without sufficient distributable reserves may be unlawful and could instead need to be treated as a loan, repayment or another form of remuneration, depending on the facts.
Professional bookkeeping services can ensure that the vouchers, minutes and accounting entries are created when the payment is made. Our small business bookkeeping records guide explains the wider documents a company should retain.
What You Need Before Filing
To complete the dividend section accurately, gather:
- Dividend vouchers for payments from your own company.
- Annual tax statements from investment platforms.
- Details of taxable foreign dividends.
- Your P60 for salary received through payroll.
- P11D details if you received taxable benefits.
- Bank interest and property income records.
- Details of pension contributions made by 5 April 2026.
- Gift Aid donation records.
- Capital gains information.
- Child Benefit details where the High Income Child Benefit Charge may apply.
- Director’s loan account records.
Your P60 includes employment income but not dividends. Salary, benefits, savings income, property profits and dividends must all be brought together to establish your final liability.
How Dividends Interact With Other Income
Dividends are generally treated as the top slice of income. Non-savings income, such as salary, pension income, trading profits and rental profits, is considered first. Savings income follows, with dividends then added above it.
This means a director’s dividend rate depends on how much of the tax bands has already been used by other income. One dividend payment can therefore be taxed partly at 8.75% and partly at 33.75%.
Our guide to UK income tax explains how the bands operate. The Self-Employed Tax Calculator and Take-Home Pay Calculator can help with initial estimates, while our tax tables for 2025/26 bring the main thresholds together.
If adjusted net income exceeds £100,000, the personal allowance is reduced by £1 for every £2 above the threshold. It is fully withdrawn at £125,140. Dividend income counts when adjusted net income is calculated, so a large dividend can reduce or eliminate the personal allowance and create a significantly higher overall tax bill.
High Income Child Benefit Charge
Dividend income also counts towards adjusted net income for the High Income Child Benefit Charge.
For 2025/26, the charge begins when the higher-income partner’s adjusted net income exceeds £60,000. It withdraws 1% of the family’s Child Benefit for every £200 of income above £60,000, reaching 100% at £80,000.
For example, if adjusted net income is £65,000, the charge is 25% of the Child Benefit received for the relevant period. This assumes the individual is the higher-income partner and the other conditions for the charge are met.
If you already complete a self assessment tax return, the charge should be included there. A new PAYE service is available for some people who need to pay the charge but do not otherwise need Self Assessment.
Dividends and Your Company Accounts
Your personal return and the company’s accounts are separate, but the underlying records must agree.
The company accounts record dividends paid or payable during the company’s accounting period. Your personal return reports dividends that became taxable during the personal tax year. Because the periods may not align, the totals do not necessarily match without a reconciliation.
Dividends are paid from post-Corporation Tax profits and are not deductible when calculating the company’s taxable profits. A corporate tax accountant can ensure the accounts identify distributions correctly and that sufficient reserves existed when each dividend was authorised.
Our guide to corporation tax deadlines in the UK explains the company filing and payment dates alongside your personal obligations.
Alphabet Shares and Different Share Classes
Companies with alphabet shares or several classes of ordinary shares need to check the rights attached to each class before paying dividends.
A company can pay different dividends on different classes only where its articles and the terms of issue allow this. The payment must follow the shareholders’ legal rights, and the board minutes and vouchers must identify the class on which the dividend is paid.
Informally allocating dividends between family members without considering share rights, distributable reserves and anti-avoidance rules can create tax and company-law problems. Proper professional bookkeeping services should be combined with advice on the articles of association and share structure.
Director’s Loan Accounts
A dividend does not have to be transferred directly to a bank account to become taxable. If it is credited to a director’s loan account and the director can draw on it, it may have been placed at their disposal and become taxable at that point.
If an overdrawn director’s loan is later released or written off by a close company, the amount is generally taxed on the participator as dividend income. There can also be National Insurance and company tax consequences depending on the director’s employment and shareholder status.
Our guide to directors loan accounts explains the wider implications, including the company’s potential section 455 liability where a loan remains outstanding.
Payments on Account
Payments on account are advance payments towards the following year’s Self Assessment liability. Each payment is normally half of the previous year’s relevant tax bill.
For the 2025/26 tax year, the payments on account were due on:
- 31 January 2026.
- 31 July 2026.
Any balancing payment is due on 31 January 2027.
Payments on account may include tax arising from dividends, although amounts collected at source and certain other liabilities are excluded from the calculation. If your dividend income increased during 2025/26, the payments based on 2024/25 may not cover the final bill.
You can claim to reduce payments on account if you reasonably expect the liability to be lower. However, interest is charged if they are reduced below the amount ultimately due. A management accounting service review can help estimate the position before a reduction is requested.
Keeping Records With Xero
If dividend transactions have been maintained in a Xero accountant supported system, preparing the return should be straightforward. The accounting entries should agree with the vouchers, minutes, bank statements and director’s loan account.
Xero reporting for owners explains how directors can review company performance and available reserves before deciding whether a dividend is affordable.
How Xero can make it easier to stay on top of cash flow also explains why current records matter beyond tax compliance. Our bookkeeping checklists for UK small businesses provide a practical monthly framework.
Pension Contributions and the 2025/26 Return
Only qualifying personal pension contributions made during the 2025/26 tax year can generally affect adjusted net income for that year. A contribution made after 5 April 2026 cannot normally be carried back to reduce the 2025/26 dividend tax bill.
This is different from carrying forward unused annual allowance. Carry forward can allow a larger contribution in the current tax year by using unused allowance from the previous 3 years, but it does not backdate the contribution or its Income Tax relief.
When completing the return, make sure eligible relief-at-source contributions made during 2025/26 are entered at their gross value. For example, an £8,000 personal payment to a relief-at-source pension is normally treated as a £10,000 gross contribution.
Our self assessment tax return service includes a review of pension contributions, Gift Aid and adjusted net income before the return is submitted.
Dividend Income From Other Sources
Directors must include taxable dividends from other investments as well as dividends from their own company.
This may include:
- UK listed shares held outside an ISA.
- Investment funds and unit trusts.
- Shares in other private companies.
- Foreign company dividends.
- Dividends credited to an investment account but automatically reinvested.
Dividends within an ISA are exempt and should not be reported. Dividends held outside an ISA generally need to be included if you complete Self Assessment, even where the total is covered by the dividend allowance.
Investment platforms usually provide an annual consolidated tax certificate. Keep this with your company dividend vouchers and other tax records.
Common Dividend Reporting Mistakes
Frequent errors include:
- Using the company year rather than the personal tax year.
- Omitting dividends credited to a loan account.
- Reporting the dividend allowance instead of the total dividends received.
- Excluding dividends because no tax is due.
- Treating foreign dividends as UK dividends.
- Forgetting dividends from investment platforms.
- Entering ISA dividends unnecessarily.
- Paying dividends without sufficient distributable profits.
- Paying different shareholders without checking their share rights.
- Treating drawings as dividends without minutes and vouchers.
A professional bookkeeping services approach, combined with a qualified accountant’s review, helps identify these issues before submission.
Dividend Rates From 6 April 2026
Although the 2025/26 return uses the existing rates, directors should also plan for the increases that began on 6 April 2026.
For 2026/27, the ordinary dividend rate increased from 8.75% to 10.75%, while the upper rate increased from 33.75% to 35.75%. The additional rate remains 39.35%, and the dividend allowance remains £500.
A salary-and-dividend strategy that was appropriate in 2025/26 may therefore produce a different result in 2026/27. Any extraction plan should consider Corporation Tax, employer and employee National Insurance, personal tax, available reserves and the company’s cash requirements.
Frequently Asked Questions
What is the dividend allowance for 2025/26?
The dividend allowance is £500. It was also £500 in 2024/25. Dividends above the allowance are taxed at 8.75%, 33.75% or 39.35% for 2025/26, depending on the tax band in which they fall.
When is the 2025/26 return due?
The online deadline is 31 January 2027. The paper deadline is 31 October 2026. Tax due for 2025/26 is normally payable by 31 January 2027.
Do I report dividends within the £500 allowance?
Yes, if you are completing a Self Assessment return, you should report the total dividend income, including amounts covered by the allowance.
What evidence should I keep?
Keep board minutes, dividend vouchers, accounts showing available distributable profits, bank records, loan account entries and investment platform statements.
What if a dividend was declared before 6 April but paid afterwards?
The answer depends on whether it was an interim or final dividend and when it became due and payable or was placed at your disposal. Do not rely solely on the declaration date without checking the supporting resolution and payment terms.
Can a pension contribution made now reduce my 2025/26 dividend tax?
No. A new personal contribution made after 5 April 2026 normally belongs to 2026/27 and cannot be carried back to 2025/26.
What if a previous return contains an error?
You can normally amend a Self Assessment return within 12 months of its filing deadline. For the 2025/26 return, the usual amendment deadline is 31 January 2028. Older errors may require a separate disclosure to HMRC.
File Your 2025/26 Return With the Right Support
The 2025/26 dividend allowance remains £500, but accurate reporting still requires more than adding together bank transfers. You need to identify the correct tax dates, reconcile company and personal records, check distributable profits, include dividends from other investments and account for wider issues such as the High Income Child Benefit Charge and personal allowance taper.
At U&W Chartered Accountants, we prepare Self Assessment returns for company directors across Stockport and the wider UK. We can also review your dividend strategy for 2026/27, when the ordinary and upper dividend tax rates are higher.
Find out more on our about page or contact us through our contact page. You can request an instant quote for your limited company or as a sole trader to get started.
