⚠️ Hey, you are using an outdated web browser.
TaxScouts might not work with your browser. Upgrade here

Let us sort your Self Assessment online. £119, all in. Learn more


A dividend is a sum of money that you might receive if you own shares in a profitable limited company. Only limited companies can pay them. If you’re a sole trader, you won’t be able to extract dividends as income from your business.

In order to pay shareholders dividends, the limited company directors have to all get together to “declare” the funds that they’ll be releasing. 

The payment can only come out if the company makes a profit – and it’s deducted after Corporation Tax and VAT. Dividends are a very tax efficient method of extracting income from a company.

Do I have to pay tax on a dividend?

Dividends are taxed at a different rate from most other types of income. Take a look at the table below to see what you might owe in the 2020/21 tax year.

Annual salary Tax bracket Tax rate
Up to £12,500 Personal allowance 0%
£12,501 – £50,000 Basic rate 7.5%
£50,001 – £150,000 Higher rate 32.5%
£150,000+ Additional rate 38.1%

A few other things to bear in mind about dividends are:

  • You don’t need to pay any National Insurance contributions for your income from them
  • Dividends from Stocks & Shares ISA accounts are entirely tax-free
  • The Dividend Allowance entitles you to earn your first £2,000 tax-free

How do I pay tax on dividends?

This depends on how much you earn. 

  • If you earn between £2,000 and £10,000, you can either do a Self Assessment tax return or pay through your PAYE tax code
  • If you earn over £10,000 from dividends, you have to file a Self Assessment tax return

Calculate what you owe

Check out our dividend tax calculator if you want to work out what you might owe. Otherwise, head over the HMRC to read about historic dividend rates. 

Hey there! We really hope this article helped you. Tax matters can be a dreadful topic at times. We know. That's why we started TaxScouts.
A stress-free way to getting your taxes done.

Have a minute? See how it works

More guides & useful information

Let us sort your Self Assessment online. £119, all in.

That’s right. No matter how complicated it gets or why you need to do a return in the first place, it’ll cost £119 to get it done. That includes VAT, last-minute changes and all the support you may need.

How TaxScouts works

Answer a few simple questions

And we mean a few. After a couple of minutes of answering questions online we’ll have everything we need to start preparing your tax return.

Then get paired with a tax return accountant

That’s right, you’ll be matched with a real certified accountant who is best suited to prepare your return. Plus, they’re on hand for questions whenever you need.

We file your Self Assessment for you

Once you’ve signed off your return, your TaxScouts accountant will submit your return with HMRC for you.

That’s it! We told you it was simple.