Shareholders must pay dividend tax to HMRC on any dividends they obtain from a business. Generally speaking, dividends are the most tax-efficient method for UK limited company owners to extract cash from their company. Everything you need to know about UK dividend tax in 2024 will be covered in this article, including how company dividends operate, dividend tax rates, dividend tax allowances, and how to report dividend tax to HMRC.
You will get answer on What Are the UK Dividend Tax Rates and How Much Do you pay? Prior to beginning to pay dividend tax, you may utilize your tax-free personal allowance if your only source of income is from investments. Therefore, in 2023–24, you might earn an additional £12,570 tax-free on top of the £1,000 dividend allowance (the same as in 2022-23). The personal allowance is this. To calculate your possible tax liability, you can also utilize our dividend tax calculator.
What is dividend tax?
If you own stock in a company, you can profit in two ways: either by selling your shares when their value increases or by receiving dividend payments from the business in the event that it decides to distribute earnings to its owners. One excellent method to get a consistent income from your investments is through dividends but you might have to pay taxes, just like you would with any income.
Although dividend taxation is less taxed than income from employment or a pension. You can increase the amount of money you get from your assets before you have to start paying taxes by using your tax-free dividend allowances.
How and When Do I Pay Dividend Tax?
If your dividends exceed your TFA in the UK, you must pay tax on them. Dividend tax rates are determined by your income tax band. The dividend tax rates for the 2023–2024 tax year are as follows:
- The initial £1,000 in dividends are 0%.
- 8.75% on dividends paid out between £12,571 and £50,270 in the basic rate range.
- Dividends in the higher rate range of £50,271 to £125,139 are subject to 33.75%.
- 39.35% on dividends paid out in excess of £125,140, or within the extra rate range.
You will need to include the dividend income on your tax return in order to pay dividend tax. You might have to file a self-assessment tax return in order to pay more tax on your dividend income if you work and pay taxes through PAYE. Typically, the 31st of January that occurs after the conclusion of the tax year is the deadline for filing your tax return.
What Are the UK Dividend Tax Rates?
| Income Tax Bands | ||
| Rate | 2023-24 Tax Rate | 2024-25 Tax Rates |
| Basic | £1 to £37,700 | £1 to £37,700 |
| Higher | £37,701 to £125,140 | £37,701 to £125,140 |
| Additional | Over £125,140 | Over £125,140 |
| Income Tax Rate | 2023-25 Tax Rate | |
| Basic | 20% | |
| Higher | 40% | |
| Additional | 45% | |
Depending on the amount of dividends you have earned over your allowance, you will have to pay dividend tax to HMRC. The following are the dividend rates for the 2023–2024 tax year:
| Dividend Rates | ||
| Rate | 2023-25 Tax Year | |
| Ordinary | 8.75% | |
| Upper | 33.75% | |
| Additional | 39.35% | |
What tax rates apply to my dividend income?
The tax rates that apply to your taxable dividend income are determined by the amount of your earned income and saved income, since your taxable dividend income is taxed after these amounts. Therefore, to determine the tax bracket into which the dividend income falls, you must add your dividend income to your earned income and saved income.
Dividends are subject to different tax rates than earned income, saved income, and other unearned income (including rental income). A dividend allowance, which is a nil-rate band that applies to the first £1,000 of dividend income received in a year, is also available to all individual taxpayers.
How to pay tax on dividends
| Online or telephone banking (Faster Payments) | Same day or next one |
| CHAPS | Same day or next one |
| Bacs | Three working days |
| Debit card | Same day or next one |
| Credit card (1.5% charge) | Same day or next one |
| Cheque through the post | Three working days |
| Existing Direct Debit | Three working days |
| New Direct Debit | Five working days |
| PAYE tax code | – |
| At the Post Office | Same day or next one |
| At your bank or building society | Same day or next one |
How much is the 2023/24 Dividend Allowance?
- The total amount of tax-free dividends you can earn in a year is known as the dividend allowance. You can use each of them separately from the personal tax allowance, so regardless of whatever additional income you may earn, you won’t be required to pay taxes on profits up to the allowance amount.
- If you are a dividend recipient, you may have noticed that the TFA for dividends in the 2022–2023 tax year is higher than the threshold this year.
- The dividend allowance can only be used for dividends, although the personal tax-free allowance can be used for the majority of income sources, including dividends.
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