Dividend Tax

Summary of Key Points

• The July 2015 Budget highlighted a new dividend tax from 6 April 2016.
• Take care that dividends in your company are properly declared and documented.

The basics

• The first £500 of dividend income in 2024-25 has 0% tax.
• For basic rate taxpayers, the dividend rate will then be 8.75%.
• The rates in the higher and top bands will be 33.75% and 39.35%.

Dividends in tax sheltered wrappers such as pensions and ISAs do not count towards the dividend tax.

Take care over declaring dividends

Because of the new tax, it is now more important than ever to ensure that dividends are properly declared and documented.  For example, a dividend declared on 5 April 2024 counts towards tax year 2023-24.

But if that dividend is declared on 6 April 2024 it then falls within 2024-25. It is not hard to come up with a scenario where the 5 April 2024 dividend is at 0% or 8.75%, but the 6 April 2024 one is at 33.75% or 39.35%.  So getting this stuff right can save shareholders a hefty amount of tax!