Tax on dividends
Check if you have to pay tax on dividends
You may get a dividend payment if you own shares in a company.
You can earn some dividend income each year without paying tax.
This guide is also available in Welsh (Cymraeg).
How dividends are taxed
You do not pay tax on any dividend income that falls within your Personal Allowance (the amount of income you can earn each year without paying tax).
You also get a dividend allowance each year. You only pay tax on any dividend income above the dividend allowance.
You do not pay tax on dividends from shares in an ISA.
Dividend allowance
| Tax year | Dividend allowance |
|---|---|
| 6 April 2024 to 5 April 2025 | £500 |
| 6 April 2023 to 5 April 2024 | £1,000 |
| 6 April 2022 to 5 April 2023 | £2,000 |
| 6 April 2021 to 5 April 2022 | £2,000 |
Tax rates on dividends
How much tax you pay on dividends above the dividend allowance depends on your Income Tax band.
| Tax band | Tax rate on dividends over the allowance |
|---|---|
| Basic rate | 8.75% |
| Higher rate | 33.75% |
| Additional rate | 39.35% |
To work out your tax band, add your total dividend income to your other income. You may pay tax at more than one rate.
Example
You get £3,000 in dividends and earn £29,570 in wages in the 2024 to 2025 tax year.
This gives you a total income of £32,570.
You have a Personal Allowance of £12,570. Take this off your total income to leave a taxable income of £20,000.
This is in the basic rate tax band, so you would pay:
- 20% tax on £17,000 of wages
- no tax on £500 of dividends, because of the dividend allowance
- 8.75% tax on £2,500 of dividends
Check if you need to tell HMRC
If you have dividend payments over both your unused Personal Allowance and dividend allowance, you need to report these to HM Revenue and Customs (HMRC).