Dividend Tax Rates 2024 UK – What is it and How Much You Will Have to Pay?
Any dividends that shareholders receive from a business are subject to dividend tax obligations under HMRC. In general, UK limited company owners find that the most tax-efficient way to remove funds from their firm is through dividends. This article will cover all the information you require on UK dividend tax in 2024, including corporate dividend policies, rates, allowances, and filing dividend tax returns to HMRC.
What Are the Dividend Tax Rates in the United Kingdom and How Much Do You Pay? will be answered. If your only source of income is from investments, you can use your tax-free personal allowance before you start paying dividend tax. For that reason, in addition to the £1,000 dividend allowance (which is the same as in 2022-23) you may get an additional £12,570 tax-free in 2023–2024. This is the personal allowance. You can also use our dividend tax calculator to determine your potential tax liability.
What is dividend tax?
Owning stock in a company gives you the opportunity to profit in two ways: either you can sell your shares when they appreciate in value, or you can receive dividend payments from the company if it chooses to pay out its owners’ earnings. Dividends are a great way to receive a steady income from your assets, but like other income, you may have to pay taxes on them.
Despite this, dividend income is not as taxed as income from a job or pension. By using your tax-free dividend allowances, you can raise the amount of money you receive from your assets before you are required to begin paying taxes.
How and When Do I Pay Dividend Tax?
In the UK, you have to pay tax on profits that are greater than your TFA. Your income tax bracket determines the dividend tax rate. The following are the dividend tax rates for the 2023–2024 tax year:
Dividends on the initial £1,000 are 0%.
8.75% on dividends distributed in the basic rate range of £12,571 to £50,270.
33.75% is applied to dividends in the higher rate range of £50,271 to £125,139.
39.35% on dividends distributed within the additional rate band or over £125,140.
To pay dividend tax, you must include the dividend income on your tax return. If you work and pay taxes through PAYE, you may be required to file a self-assessment tax return in order to pay additional tax on your dividend income. The deadline for filing your tax return is usually January 31st, which falls on the day after the end of the tax year.
What Are the UK Dividend Tax Rates?
| Income Tax Bands | ||
| Rate | 2023-24 Tax Rate | 2024-25 Tax Rates |
| Basic | £1 to £37,700 | £1 to £37,700 |
| Higher | £37,701 to £125,140 | £37,701 to £125,140 |
| Additional | Over £125,140 | Over £125,140 |
| Income Tax Rate | 2023-25 Tax Rate | |
| Basic | 20% | |
| Higher | 40% | |
| Additional | 45% | |
Depending on the amount of dividends you have earned over your allowance, you will have to pay dividend tax to HMRC. The following are the dividend rates for the 2023–2024 tax year:
| Dividend Rates | ||
| Rate | 2023-25 Tax Year | |
| Ordinary | 8.75% | |
| Upper | 33.75% | |
| Additional | 39.35% | |
What tax rates apply to my dividend income?
The amount of your earned income and saved income determines the tax rates that apply to your taxable dividend income because it is taxed after these amounts. As a result, you must add your dividend income to your earned income and saved money in order to calculate the tax band into which the dividend income belongs.
The tax rates on dividends differ from those on earned, saved, and other unearned income (such as rental income). All individual taxpayers are also eligible for a dividend allowance, which is a nil-rate band that applies to the first £1,000 of dividend income received in a given year.
How to pay tax on dividends
| Online or telephone banking (Faster Payments) | Same day or next one |
| CHAPS | Same day or next one |
| Bacs | Three working days |
| Debit card | Same day or next one |
| Credit card (1.5% charge) | Same day or next one |
| Cheque through the post | Three working days |
| Existing Direct Debit | Three working days |
| New Direct Debit | Five working days |
| PAYE tax code | – |
| At the Post Office | Same day or next one |
| At your bank or building society | Same day or next one |
How much is the 2023/24 Dividend Allowance?
The dividend allowance is the total amount of tax-free dividends you are eligible to receive in a given year. You will not be obliged to pay taxes on profits up to the allowance amount if you use each of them independently from the personal tax limit, regardless of any additional income you may generate.
If you are a dividend payer, you might have observed that this year’s threshold is higher than the TFA for payouts in the 2022–2023 tax year.
While the personal tax-free allowance can be used for other forms of income, including dividends, the dividend allowance can only be used for dividends.
