Tax on dividends

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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 an바카라 사이트¯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

How much tax you pay

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.

You may be able to get an estimate of how much tax you have to pay on dividends you receive.

Example

You get £3,000 in dividends and earn £29,570 in wages in the 2024 to 2025 tax year.바카라 사이트¯Â 

This gives you a total income of £32,570.바카라 사이트¯Â 

You have a Personal Allowance of £12,570. Take this off your total income to leave a taxable income of £20,000.바카라 사이트¯Â 

This is in the basic rate tax band, so you would pay:바카라 사이트¯Â 

  • 20% tax on £17,000 of wages바카라 사이트¯Â 
  • 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).

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Part of Set up a limited company: step by step

  1. Step 1 Check if setting up a limited company is right for you

    1. Check what a private limited company is

    How you set up your business depends on what sort of work you do. It can also affect the way you pay tax and get funding.

    Most businesses register as a limited company or a sole trader.

    1. Find out about the different ways to set up a business

  2. Step 2 Choose your limited company type

    1. Check whether you'll be limited by shares or guarantee

  3. Step 3 Choose directors and a company secretary

    You must appoint a director but you do not have to appoint a company secretary.

    1. Find out what directors are responsible for
    2. Check who can be a director or company secretary

  4. Step 4 Decide who the shareholders are

    You need at least one shareholder, who can be a director.

    1. Check how to choose shareholders for a company limited by shares
    2. You are currently viewing: Find out how dividends from shares are taxed

  5. or Decide who your guarantors are

    You need at least one guarantor who can be a director.

    1. Check how to choose guarantors for a company limited by guarantee

  6. and Identify people with significant control (PSC) over your company

    You need to identify people with significant control (PSC) - for example, anyone with more than 25% of the shares or voting rights.

    1. Find out what counts as a PSC

    You'll confirm these when you register your company with Companies House.

  7. Step 5 Choose a name

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  8. Step 6 Prepare documents agreeing how to run your company

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    • 'memorandum of association'
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    • 'statement of capital'
    • 'statement of guarantee'
    1. Find out how to create these documents

  9. Step 7 Check what records you'll need to keep

    1. Check the company and accounting records you must keep

  10. Step 8 Register your company with Companies House

    You'll need to register an official address and choose a SIC code - this identifies what your company does.

    1. Check the rules for registered office addresses and email addresses
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  11. Step 9 Find out what to do after you've registered

    There are some things you may need to do once you've registered a limited company.

    1. Add Corporation Tax services to your business tax account
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