Dividend Tax
What is Dividend Tax?
Dividend Tax is a tax on income from dividends (payments companies make to shareholders from their profits). If you receive dividends outside a tax-free wrapper, you may owe tax on them.
How much is the dividend allowance?
You can receive £500 in dividends per tax year before you pay anything. This allowance resets every April.
How much Dividend Tax do you pay?
Above the £500 allowance, the rate depends on your income tax band:
- Basic rate taxpayers. 8.75%
- Higher rate taxpayers. 33.75%
- Additional rate taxpayers. 39.35%
Do you pay Dividend Tax in an ISA?
No. Dividends received inside an ISA or SIPP are tax-free.
In a GIA, the first £500 is covered by your allowance. Beyond that, you may owe tax.
Key points about Dividend Tax
- Tax on dividend income, not on growth
- £500 annual allowance. Dividends below this are tax-free
- ISAs and SIPPs are exempt. No Dividend Tax inside these accounts
More information
Scrimpr links to official sources so you can verify what you’ve learned.