What are the dividend tax rates in the UK?
How to calculate the tax on dividends
- add your income from dividends to your all other income (employment, rental income, etc.)
- then work out your income tax band
- you’ll pay tax on all your dividends based on what is your highest tax band.
The dividend tax rates in 2020/21
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.
How about dividends from investments?
Rules are simple here:
- zero tax on dividends from shares in a stocks & shares ISA
- but: you do pay tax on dividends from any other shares you own, even if you reinvest these dividends into purchasing new shares – ask your broker or trading platform how they handle dividends from “income stocks”.
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