How do you tax dividend income? What is the dividend allowance? What are the dividend tax rates?
Subscribers, for detailed workings and the interaction with other reliefs and allowances, see:Dividend taxandDividend tax: Trusts.
This is a freeview 'At a glance' guide to the taxation of dividends.
Dividend tax basics
- Dividend income is treated as the top band of income.
- Dividends are taxed at 8.75% (basic rate), 33.75% (higher rate), and 39.35% (additional rate).
- Before 6 April 2022, these rates were: 7.5%, 32.5%, and 38.1%.
- A £500 tax-free dividend allowance applies from 6 April 2024. This was:
- £1,000 for 2023-24.
- £2,000 from 2018-19 to 2022-23.
- £5,000 in 2016-17 and 2017-18.
- SeeDividend taxfor details of how the dividend allowance is allocated and its interaction with the personal allowance.
- The notional 10% tax credit on dividends was abolished from 6 April 2016.
- TheDividend taxguide contains details of how foreign dividends and scrip (stock) dividends are reported and taxed.
- Individuals who are basic rate taxpayers who receive dividends of more than the dividend allowance and who have not been sent a notice to file a tax return should Notify HMRC of chargeability and complete Self Assessment returns.
How does dividend tax work?
If you have dividend income (dividends held outside of an ISA) of less than the dividend allowance you pay no tax on your dividends, even if you are a higher or additional rate taxpayer. Your dividends are covered by the dividend allowance.
If your total income is less than the personal allowance, your income is covered by your personal allowance and your dividend allowance is effectively unused.
If your dividend income is received through shares in an ISA, as of now, these remain tax-free and the dividend allowance will not affect this income.
Example 2024-25: non-dividend income of £6,500 and dividend income of £12,000
| Income | PA | BR band |
| Non-dividend income | 6,500 | 6,500 | |
| Dividend | 12,000 | 6,070 | 5,930 |
| Total | 18,500 | 12,570 | 5,930 |
| Less dividend allowance | | | (500) |
| Taxed at 8.75% | | | 5,430 |
| Tax due | | | £475 |
Example 2023-24: non-dividend income of £6,500 and dividend income of £12,000
| Income | PA | BR band |
| Non-dividend income | 6,500 | 6,500 | |
| Dividend | 12,000 | 6,070 | 5,930 |
| Total | 18,500 | 12,570 | 5,930 |
| Less dividend allowance | | | (1,000) |
| Taxed at 8.75% | | | 4,930 |
| Tax due | | | £431 |
Further examples in theDividendsguide show the impact of the dividend allowance and the interaction of making different claims for allowances:
- Non-dividend income of £18,000 and dividend income of £22,000.
- Non-dividend income of £42,000 and dividend income of £9,000.
- Non-dividend income of £48,500 and dividend income of £5,000.
- Salary of £45,000 and dividend income of £14,000.
- Salary of £122,000 and dividend income of £15,000.
Dividend FAQs
- How is dividend income taxed when non-dividend income is in excess of the personal allowance?
- For example, for a higher rate taxpayer and an additional rate taxpayer.
- What is the impact of the loss of the personal allowance at £100,000?
- What is the impact on the High-Income Child Benefit Charge?
- How do dividends interact with the savings rate band and the saving allowance?
- Have you step-by-step examples?
See Dividends (subscriber guide)
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FAQs
How are dividends in the UK generally taxed by the IRS? Because the UK has a Tax Treaty with the US, UK dividends are subject to preferential tax rates instead of the regular tax rate of up to 39.6%. These UK 'qualified dividends' are only subject to 0-20% tax.
What is the dividend tax rate in the UK? ›
Dividend tax basics
Dividend income is treated as the top band of income. Dividends are taxed at 8.75% (basic rate), 33.75% (higher rate), and 39.35% (additional rate). Before 6 April 2022, these rates were: 7.5%, 32.5%, and 38.1%.
How much is UK dividend tax on US stock? ›
UK residents aren't subject to paying tax on US shares from the UK, but they do have to pay a tax on any dividends or income received from those US stocks. This tax is called a withholding tax (WHT) and it's 15%. Any dividends or income received from US stocks must receive this WHT 15% tax.
Are UK dividends taxable on non-UK residents? ›
If you're not a resident of the UK for the entire tax year in which you receive this income, you can choose whether to pay tax in the UK or your country of residence. Either way, you must declare dividends by completing a tax return for HM Revenue & Customs (HMRC).
How to avoid dividend tax in the UK? ›
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 .
Do I pay UK tax on US income? ›
Whether you need to pay depends on if you're classed as 'resident' in the UK for tax. If you're not UK resident, you will not have to pay UK tax on your foreign income. If you're UK resident, you'll normally pay tax on your foreign income. But you may not have to if your permanent home ('domicile') is abroad.
Do you pay tax on reinvested dividends in the UK? ›
Don't assume that your return from a fund is all 'capital gain' rather than income because you are not actually receiving it. You do have to pay income tax on reinvested dividends.
How much tax will I pay on my dividend income? ›
Qualified dividends benefit from lower tax rates. In 2024, you pay 0%, 15%, or 20% on qualified dividends, depending on your taxable income. For single filers, the 0% rate applies to income up to $44,625, 15% applies to income between $44,626 and $492,300, and 20% applies to income above $492,300.
Are dividends taxed if they are reinvested? ›
Whether or not you reinvest dividends has no impact on the taxes you'll pay. If you hold securities in a taxable account, you'll pay taxes on the dividend amount regardless of whether you reinvest or not.
Do foreigners pay tax on UK stocks? ›
If you're abroad
You do not pay Capital Gains Tax on other UK assets, for example shares in UK companies, unless either: you return to the UK within 5 years of leaving. you sell shares in a company that is 'UK property rich' and you meet the conditions for an indirect disposal.
Nonresident aliens are subject to a dividend tax rate of 30% on dividends paid out by U.S. companies. Resident aliens who hold a green card or satisfy resident rules are subject to the same tax rules as U.S. citizens.
Is dividend tax free in USA? ›
How dividends are taxed depends on your income, filing status and whether the dividend is qualified or nonqualified. Qualified dividends are taxed at 0%, 15% or 20% depending on taxable income and filing status. Nonqualified dividends are taxed as income at rates up to 37%.
How much tax do I pay on a dividend UK? ›
0% on the first £500 from dividends (this is called the Dividend Allowance) 0% if your total income is under the Personal Allowance (£12,570) 8.75% if you're a basic rate taxpayer. 33.75% if you're a higher rate taxpayer.
What do non-residents pay UK tax on? ›
Your UK residence status affects whether you need to pay tax in the UK on your foreign income. Non-residents only pay tax on their UK income - they do not pay UK tax on their foreign income. Residents normally pay UK tax on all their income, whether it's from the UK or abroad.
Does the UK withhold tax on dividends? ›
There is no requirement to deduct WHT from dividends, except in respect of property income dividends (PIDs) paid by UK REITs, which are subject to WHT at 20%, subject to certain exemptions. Therefore, dividends (apart from PIDs) may always be paid gross, regardless of the terms of the applicable DTT.
Are foreign dividends taxable in USA? ›
Are foreign dividends taxable in the United States? Definitely, yes. If you are a US person, which includes citizens, dual nationals, Green Card holders, resident aliens, and domestic legal entities, you are subject to US tax on your global income. This global income includes money earned through foreign dividends.
Does the US have double taxation with the UK? ›
Tax residents in the US
So Americans who are also tax residents in another country may need to pay taxes on the same income twice: once to the US and once to their country of residence. Fortunately, there are ways to avoid double taxation — one of which is the US-UK tax treaty.
Do non-residents pay tax on UK income? ›
Non-residents only pay tax on their UK income - they do not pay UK tax on their foreign income. Residents normally pay UK tax on all their income, whether it's from the UK or abroad. But there are special rules for UK residents whose permanent home ('domicile') is abroad.
