Tax on dividends

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How dividends are taxed

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).

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
6 April 2020 to 5 April 2021 £2,000
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

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 2022 to 2023 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 £2,000 of dividends, because of the dividend allowance
  • 8.75% tax on £1,000 of dividends

Pay tax on up to £10,000 in dividends

Tell HMRC by:

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

Pay tax on over £10,000 in 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.

Register for Self Assessment

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

Register now

Selling your shares

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

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