Dividend income tax rates and dividend allowance

The initial portion of dividend income in a tax year that doesn't incur additional tax payment is termed the Dividend Allowance, applicable to all UK taxpayers. In the 2023/24 fiscal year, this allowance stands at £1,000, halved from its 2022/23 value, and is projected to decrease further to £500 by 2024/25.

Dividend income exceeding this allowance is subject to taxation based on the individual's income tax rate.

Determining your tax band involves combining your dividend income with other earnings in the same tax year. The tax rates on dividends vary according to the following income tax brackets:

  • Basic rate taxpayers: 8.75%
  • Higher rate taxpayers: 33.75%
  • Additional rate taxpayers: 39.35%
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