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What are the dividend tax rates in the UK?

  • 1 min read
  • Last updated 12 May 2024

How to calculate tax on dividends

  1. Add your income from dividends to all your other income (employment, rental income, etc.)
  2. Work out your income tax band
  3. You’ll pay tax on all your dividends based on your highest tax band

Take a look at this visual on how Income Tax works, so you know your income tax band is right.

Income tax rates UK

The dividend tax rates in 2024/25

This year the dividend tax rates are:

  • 0% on the first £500 from dividends (this is called the Dividend Allowance)
  • 0% if your total income is under the Personal Allowance (£12,570)
  • 8.75% if you’re a basic rate taxpayer
  • 33.75% if you’re a higher rate taxpayer
  • 39.35% if you’re an additional rate taxpayer.

Not sure about your dividend situation?

Not sure whether you need to file a tax return or report your dividend income? No worries! Get a professional, accredited accountant to help guide you in the right direction. Plus, they can help you with your tax efficiency. Book your tax advice consultation today for a low, one-off fee.

How about tax on dividends from investments?

Rules are simple here:

To figure out exactly how much tax you’ll pay, you can use our dividend tax calculator for 2023/24 below:

Your situation

Outlined number oneImage of an arrow
How did you earn dividends?
Dividend income
£
Other income
?
£

Tax and profit

Outlined number two
  • Your dividend profits
    £3,000
  • Dividend tax to pay
    £219
    £500 tax-free dividend allowance
    ?
  • Profit after tax
    £2,781
  • You can either call HMRC on 0300 200 3300 to take this tax from your salary or pension, or include it on your Self Assessment tax return.

    How your dividend tax is calculated

    Tax on dividends is calculated pretty much the same way as tax on any other income.

    The biggest difference is the tax rates – instead of the usual 20%, 40%, 45% (depending on your tax band), you’ll be taxed at 8.75%, 33.75%, and 39.35%.

    The numbers look strange but the reason is simple: the company paying you those dividends already paid corporate tax, so you’re paying the difference.

    This is mostly relevant if you own your company and you’re trying to decide the best way to pay yourself: dividends or salary. Keep in mind that if you pay from your salary, you also need to pay National Insurance.

    In your case you earned £3,000 in dividends and £29,000 in other income (this can be salary, rent, etc.).

    Dividend Tax

    You don’t pay any dividend tax on the first £500 you make in dividends.

    You pay 8.75% on the next £2,500

    Call HMRC on 0300 200 3300 so they can change your tax code – you’ll pay the dividend tax through your salary or pension.

    If you normally file a tax return, you can also pay dividend tax through it.

    Need to delcare your dividend profits or losses?

    Get an accredited accountant to sort and file your Self Assessment tax return to declare your dividend tax liabilities to HMRC. Use TaxScouts for a stress-free process and a low, one-off price.

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