If you own stocks and shares, you may receive dividend payments (see the
Stocks and Shares Section). If these payments exceed the
dividend allowance, you will most likely be required to pay tax.
In tax year 2024/25, the
dividend allowance is
£500 - this is a
reduction in the 2023/24 rate of £1,000. If you receive dividend payments over £500, the rate of tax you have to pay can be calculated as follows:
- Add your dividend income to all other income. (Of note, for the dividend calculations, the rest of the UK rates are used, not the Scotland rates):
- You don't pay tax on any dividend payments that fall within the £12,570, personal allowance.
- For dividend payments that take you over the personal allowance, you pay:
- 8.75% on basic rate.
- 33.75% on higher rate.
- 39.35% on additional rate or top rate.
- For example, in 2024/25 you earn £26,000 from your salary and £2,000 from dividends. With a total of £28,000 you fall into the basic rate. You would therefore pay 8.75% tax on £1,500 of your dividend payments (£2,000 minus the £500 allowance), so would pay £131.25 in tax on top of the PAYE tax.
- If you receive over £500 in dividend payments, contact the HMRC helpline. You can discuss changing your tax code to ensure the tax is paid. Alternatively, you can complete a Self Assessment tax return. If you earn over £10,000 in dividends, you must submit a Self Assessment tax return.
