Tax on dividends

How dividends are taxed

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

You only pay tax on dividends that go above your dividend allowance in the tax year.

You do not pay tax on dividends from shares in an ISA.

Dividend allowance

Tax year Dividend allowance
6 April 2019 to 5 April 2020 £2,000
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

The rules are different for dividends before 6 April 2016.

Working out tax on dividends above your allowance

The tax you pay depends on which Income Tax band you’re in.

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

Add your income from dividends to your other taxable income to work out your tax band. You may pay tax at more than one rate.

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

Example You get £3,000 in dividends in the 2019 to 2020 tax year. The dividend allowance is £2,000, so this means you pay tax on £1,000 of your dividends.

Your other taxable income is £35,000. Add this to your dividends of £3,000 and your total taxable income is £38,000.

You pay a rate of 7.5% on £1,000 of dividends because your total taxable income is within the basic tax band.

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 dividends

Tell HMRC by:

You do not need to tell HMRC if your dividends are within your dividend allowance for the tax year.

Over £10,000 dividends

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

If you do not 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.