What are the dividend tax rates in the UK?

How to calculate the tax on dividends

To calculate how much tax you need to pay on dividends, simply:

  1. add your income from dividends to your all other income(employment, etc.)
  2. then work out your income tax band
  3. you’ll pay tax on all your dividends based on what is your highest tax band.

The dividend tax rates in 2019/20

This year the dividend tax rates are:

  • 0% on the first £2,000 from dividends (this is called the Dividend Allowance)
  • 0% if your total income is under the Personal Allowance (£12,500)
  • 7.5% if you’re a basic rate taxpayer
  • 32.5% if you’re a higher rate taxpayer
  • 38.1% if you’re an additional rate taxpayer.

Where the dividends tax can get confusing

Basically:

  • income gets taxed “in tranches”: the first £12.5k at 0%, then the next £37.5k at 20%, and so on
  • dividends get taxed in their entirety based on what is your highest tax rate.

Example: How Matthew pays tax on dividends

Matthew receives a director salary of £110,000 and a dividend income of £8,500 from being a shareholder in his company.

How much tax will he pay?

  1. Deduct the Dividend Allowance (£2,000) from the dividend income: £6,500 taxable dividends
  2. His income is above £100,000 so his tax allowance has been reduced from £12,500 to £7,500
  3. His company will pay tax on his director salary via PAYE: £33,500
  4. His income also went over the higher rate threshold so 100% of his taxable dividends will be taxed at 32.5% – the extra tax to pay on the dividends is £2,112.

How about dividends from investments?

Rules are simple here:

  • zero tax on dividends from shares in an stocks & shares ISA
  • but: you do pay tax on dividends from any other shares you own, even if these dividends are reinvested into purchasing new shares – ask your broker or trading platform how they handle dividends from “income stocks”.

Need help with your tax return?

Get your self assessment prepared for you online by certified accountants for £119

Online self assessment preparation assisted by professional accountants

How TaxScouts works

Simple online tax assessment

1. Simple online tax assessment

Our online tax-bot will go over your tax situation and will make sure you won’t overpay your taxes.

Chat to human advisors

2. Chat to human advisors

You can talk to one of our tax assistants at any time during the process when you have any questions.

We’ll sort your documents online

3. We’ll sort your documents online

We’ll tell you exactly what documents you need and sort them for you online. You just upload them or snap a picture with your phone.

Everything gets prepared for you

4. Everything gets prepared for you

Your certified accountant will go over your details & prepare your tax return for you to review. It will be filed on your behalf once you approve it.

"Brilliant service"
Surprised by how easy the process was. Additionally it's saved me money, so all round a win.
Jo B
"Absolutely amazing service"
I've been worrying about my tax return for weeks and I'm so pleased I contacted TaxScouts. Outstanding service and problem solved.
Sandra S
"Absolutely outstanding"
Very quick turnaround, all my questions answered almost immediately and brilliant value.
Aimee J

Who our service is for

First time tax filers

We have a simple online service that guides you through the entire process. Regardless of your reasons for doing your tax return we'll help you get it done right.

Construction workers

We'll prepare your self assessment and help to maximise your CIS tax refund. We have the lowest fees in the industry and you don't have to pay up front if you're eligible for a refund.

People living overseas

Our service allows people living abroad to prepare their income tax return online. We are able to process all returns regardless of your current country of residence.

Company directors

UK company directors are required to file their self assessment annually. TaxScouts handles this through a simple online process.

Landlords

Long Lets, Airbnb, Capital Gains. TaxScouts will sort out your self assessment and take away the worry of tracking all the recent tax changes.

Self-employed

TaxScouts ensures the self employed don't overpay on their taxes. We'll help you benefit from all the tax breaks and deductions that can be applied to your return.

And for everyone else who needs to do their self assessment

At TaxScouts we appreciate that tax returns are highly individual. Before you get assigned an accountant we make sure to understand your circumstances and help you build your optimal tax profile.

Let's start by creating your account

What happens next

  • We'll ask you a couple of short questions
  • Then we'll tell you what documents we need
  • Finally one of our qualified accountants will file your tax return