Dividend nil rate band (UK income tax)
For 2025–26, the first £500 of taxable dividend income benefits from a 0% dividend nil rate band. The nil-rate amount still occupies the relevant income-tax band, so it can affect the rate applied to other income. Dividend income above the nil-rate band is taxed at the applicable dividend rate; the individual’s other income, personal allowance, tax year and circumstances affect the computation. ACCA’s Finance Act 2025 guidance applies this 2025–26 basis to TX-UK June 2026–June 2027.
Worked example
For 2025–26, assume £1,000 of taxable dividends remain after allocating the personal allowance and all fall within the basic-rate band. The first £500 is taxed at 0%; the remaining £500 at the 2025–26 dividend ordinary rate of 8.75% gives £43.75 tax.
Common mistake
Removing nil-rate dividends from taxable income when determining band usage.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | TX (UK) | Direct | June 2026–June 2027 |