Sharing dividends with your family
Paying part of your company's dividends to a husband, wife or grown-up child can use their lower tax bands. See what your family could save, and how likely HMRC is to say no.
Your answer
Enter the dividends your company will pay and who would share them to see the tax saving and the risk.
About this calculator
For owners of a small company who take dividends and wonder whether paying some to a husband, wife, civil partner or child would lower the family's tax. It works out the tax for you and for them, today and after the split, then tells you in plain words how likely HMRC is to say no.
In a 2007 court case (Jones v Garnett, known as Arctic Systems), a husband and wife won: an outright gift of normal shares between them is protected. A separate class that only gets dividends, a dividend waiver, a gift with strings, or a child under 18 can turn out very differently (the settlements rules, ITTOIA 2005 s624 to s629). It covers England, Wales and Northern Ireland, and income tax only. We do the tax sums here; share rights, articles and waivers need drafting, and we do that with you.
What happens to your answers
We don’t keep them. Your answers go to our server to do the sums and aren’t stored or logged. If you copy a link to your answers, they’re in the link itself, so only share it with people you trust.
How it’s worked out
We work out each person's income tax on their own. Other income comes first, with dividends on top. The tax-free allowance covers other income first, then the first £500 of dividends is tax-free, and the rest is taxed at 10.75%, 35.75% or 39.35% depending on the band. We add up the family's tax today, with you taking every dividend, and after the split. The difference is the saving.
Then we check the rules on gifts of income and give a risk of low, medium, high or very high. That level is our judgement, not the law. Where the law says the dividends are still yours (a gift with strings, a waiver signed too late, or more than £100 a year to your own child under 18 from your gift), we show the saving as nil and the saving on paper beside it.
Worked example
Sharing the dividends could save your family about £11,405 a year in tax, with a low risk.
2026/27 tax year · England, Wales and Northern Ireland rates · today you take every dividend · income tax only
| Dividends the company would pay this year | £80,000 |
|---|---|
| Tax-free allowance each (less £1 for every £2 of income over £100,000) | £12,570 |
| Tax-free dividends each, then 10.8%, 35.8% and 39.4% | £500 |
| Your tax if you keep every dividend | £19,121.25 |
| Their tax today, before any dividends | £0 |
| Family tax today | £19,121.25 |
| Dividends that would go to them: 50% of £80,000 | £40,000 |
| Your tax after the split | £4,821.25 |
| Their tax after the split | £2,894.98 |
| Family tax after the split, on paper | £7,716.23 |
| Tax your family would save in a year | £11,405.02 |
| Years back HMRC can ask for more: ordinary, careless, deliberate | 4, 6, 20 |
Worked out using HMRC's published rates for the 2026/27 tax year (6 April 2026 to 5 April 2027), on a yearly basis.
Questions people ask
Can I pay dividends to my husband or wife?
Yes, if you give them real shares outright. The court decided in 2007 that this works for normal shares with a vote and a share of the company's value. It doesn't work with strings attached, or if the shares only give a right to income. Low risk is still not no risk, so keep proof the gift was real.
Why is a child under 18 different?
If you give shares to your own child and they get more than £100 a year from what you gave them, all of it is taxed as yours. Each parent has their own £100. Shares from a grandparent aren't caught by that limit, but HMRC checks the money really came from them.
What is a dividend waiver, and why is it risky?
You give up your dividend before the right to it arises, so the other shareholders get more. No shares move, so the husband-and-wife protection doesn't apply. HMRC looks closely at waivers, especially every year, or where the company couldn't have paid the same dividend on every share without one.
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