Dividend tax: At a glance

How do you tax dividend income? What is the dividend allowance? What are the dividend tax rates?

Subscribers, for detailed workings and the interaction with other reliefs and allowances, see: Dividend tax and Dividend tax: Trusts.

This is a freeview 'At a glance' guide to the taxation of dividends.

Dividend tax basics

• Dividends are taxed at 8.75% (basic rate), 33.75% (higher rate), and 39.35% (additional rate).
  • Before 6 April 2022, these rates were: 7.5%, 32.5%, and 38.1%.
• A £500 tax-free dividend allowance applies from 6 April 2024. This was: 
  • £1,000 for 2023-24.  
  • £2,000 from 2018-19 to 2022-23. 
  • £5,000 in 2016-17 and 2017-18.
  • See Dividend tax for details of how the dividend allowance is allocated and its interaction with the personal allowance. 
• The dividend allowance is a 0% tax band, not a deduction from income. 
• Dividend income is generally treated as the top band of income. 
• The notional 10% tax credit on dividends was abolished from 6 April 2016.
• The Dividend tax guide contains details of how foreign dividends and scrip (stock) dividends are reported and taxed. 
• Special rules apply to determine when (i.e. the date) a dividend is taxed. Final and interim dividends are treated differently. 
• Individuals who are basic rate taxpayers who receive dividends of more than the dividend allowance and who have not been sent a notice to file a tax return should Notify HMRC of chargeability and complete Self Assessment returns.

How does dividend tax work?

If you have dividend income (outside of an ISA) of less than the dividend allowance you pay no tax on your dividends, even if you are a higher or additional rate taxpayer. Your dividends are covered by the dividend allowance.

If your total income is less than the personal allowance, your income is covered by your personal allowance and your dividend allowance is effectively unused.

If your dividend income is received through shares in an ISA, as of now, these remain tax-free and the dividend allowance will not affect this income.

Example 2024-25: non-dividend income of £6,500 and dividend income of £12,000

Example 2023-24: non-dividend income of £6,500 and dividend income of £12,000

Further examples in the Dividends guide show the impact of the dividend allowance and the interaction of making different claims for allowances:

• Non-dividend income of £18,000 and dividend income of £22,000.
• Non-dividend income of £42,000 and dividend income of £9,000.
• Non-dividend income of £48,500 and dividend income of £5,000.
• Salary of £45,000 and dividend income of £14,000.
• Salary of £122,000 and dividend income of £15,000.

Dividend FAQs 

1. How is dividend income taxed when non-dividend income is in excess of the personal allowance?
   • For example, for a higher rate taxpayer and an additional rate taxpayer. 
2. What is the impact of the loss of the personal allowance at £100,000?
3. What is the impact on the High-Income Child Benefit Charge? 
4. How do dividends interact with the savings rate band and the saving allowance?
5. Have you step-by-step examples?

See Dividends (subscriber guide)