🇬🇧 United Kingdom Dividend Tax Guide
Complete guide to dividend taxation in United Kingdom. Dividend Allowance: First £500 is tax-free (2024/25 tax year).
In 60 Seconds
- •Dividend Allowance: First £500 is tax-free (2024/25 tax year)
- •Basic Rate: 8.75% tax on dividends above allowance
- •Higher Rate: 33.75% tax (income £50,271 to £125,140)
- •Additional Rate: 39.35% tax (income above £125,140)
- •No Withholding Tax: You receive 100% of the dividend declared
How Dividend Tax Works
The UK system is tiered. Everyone gets a tax-free Dividend Allowance of £500. Any dividend income above this is taxed at a rate linked to your income tax band. Unlike many other countries, the UK does not withhold tax at the source.
Key Considerations
Example: Real World Scenario
Scenario
Basic rate taxpayer receiving £2,500 in dividends.
UK Dividend Tax Shields
Stocks & Shares ISA
Use your £20,000 annual ISA allowance. Assets inside an ISA are completely immune to dividend tax and capital gains tax.
Bed and ISA
Sell shares in your General Investment Account and repurchase them within your ISA to permanently shelter future yield.
Spouse Transfer
Transfer shares to a spouse who has not used their £500 allowance or is in a lower tax band to reduce family tax liability.
