Tax on dividends

How dividends are taxed

You may get a dividend payment if you own shares in a company.

You only have to pay tax if your dividends go above your dividend allowance in the tax year.

The rules are different for dividends before 6 April 2016.

Tax year Dividend allowance
6 April 2018 to 5 April 2019 £2,000
6 April 2017 to 5 April 2018 £5,000
6 April 2016 to 5 April 2017 £5,000

Above this allowance the tax you pay depends on which Income Tax band you’re in. Add your income from dividends to your other taxable income when working this out. You may pay tax at more than one rate.

Tax band Tax rate on dividends over your allowance
Basic rate 7.5%
Higher rate 32.5%
Additional rate 38.1%

HM Revenue and Customs (HMRC) has examples of how your tax is worked out if you’re over the dividend allowance.

You don’t pay tax on dividends from shares in an ISA.

Dividends that fall within your Personal Allowance do not count towards your dividend allowance.

How you pay tax on dividends

If you need to pay tax, how you pay depends on the amount of dividend income you got in the tax year.

Up to £10,000

Tell HMRC by:

Over £10,000

You’ll need to fill in a Self Assessment tax return.

If you don’t usually send a tax return, you need to register by 5 October following the tax year you had the income.

You’ll get a letter telling you what to do next after you’ve registered.

Selling your shares

You may need to pay tax if you sell your shares.