Primary school dropout remains a critical barrier to achieving universal education in Uganda, with socioeconomic factors identified as key determinants. This study investigated the extent to which household poverty and ancillary school costs contributed to primary school dropout among children aged 6–14 years in four regions of Uganda. A cross-sectional survey was conducted among 1,200 households sampled using a multi-stage cluster sampling approach. Quantitative data were collected using a structured household questionnaire administered to caregivers, while qualitative data were gathered through focus group discussions and key informant interviews. Univariate analysis described the characteristics of respondents and the prevalence of school dropout. Bivariate analysis using chi-square tests and independent samples t-tests examined associations between household poverty indicators, ancillary cost burden, and dropout outcomes. Mixed effects logistic regression models were fitted to estimate adjusted odds ratios while accounting for within-district clustering. Results revealed that 29.4% of school-age children had dropped out of primary school. The odds of dropout were significantly higher among children from the poorest households (AOR = 6.82; 95% CI: 4.71–9.87), those in households with annual income below UGX 600,000 (AOR = 4.15; 95% CI: 2.93–5.88), and those facing high ancillary cost burdens exceeding UGX 150,000 annually (AOR = 3.47; 95% CI: 2.29–5.25). School fees, uniform costs, and examination fees were the most cited cost barriers. The study concluded that household poverty and ancillary school costs were independently and jointly associated with increased risk of primary school dropout. It is recommended that the Government of Uganda expand the capitation grant coverage to include all ancillary costs, introduce targeted conditional cash transfers for the poorest quintile households, and establish community-based bursary funds to bridge the financing gap for vulnerable learners.