How do you tax dividend income? What is the dividend allowance? What are the dividend tax rates?

Subscribers, for detailed workings and the interaction with other reliefs and allowances, see: Dividend tax and Dividend tax: Trusts.

This is a freeview 'At a glance' guide to the taxation of dividends.

Dividend tax basics

How does dividend tax work?

If you have dividend income (dividends held outside of an ISA) of less than the dividend allowance you pay no tax on your dividends, even if you are a higher or additional rate taxpayer. Your dividends are covered by the dividend allowance.

If your total income is less than the personal allowance, your income is covered by your personal allowance and your dividend allowance is effectively unused.

If your dividend income is received through shares in an ISA, as of now, these remain tax-free and the dividend allowance will not affect this income.

Example 2023-24: non-dividend income of £6,500 and dividend income of £12,000

  Income PA BR band
Non-dividend income 6,500 6,500  
Dividend 12,000 6,070 5,930
Total 18,500 12,570 5,930
Less dividend allowance     (1,000)
 Taxed at 8.75%     4,930
 Tax due      £431

 

Example 2022-23: non-dividend income of £6,500 and dividend income of £12,000

  Income PA BR band
Non-dividend income 6,500 6,500  
Dividend 12,000 6,070 5,930
Total 18,500 12,570 5,930
Less dividend allowance     (2,000)
 Taxed at 8.75%     3,930
 Tax due      £344

 

Further examples in the Dividends guide show the impact of the dividend allowance and the interaction of making different claims for allowances:

Dividend FAQs 

  1. How is dividend income taxed when non-dividend income is in excess of the personal allowance?
    • For example, for a higher rate taxpayer and an additional rate taxpayer. 
  2. What is the impact of the loss of the personal allowance at £100,000?
  3. What is the impact on the High-Income Child Benefit Charge? 
  4. How do dividends interact with the savings rate band and the saving allowance?
  5. Have you step-by-step examples?

See Dividends (subscriber guide)


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