Share Dividends Tax Rates 2024

Share Dividends Tax Rates 2024 - Shares Taxes Explained
(06/04/2024 to 05/04/2025)

Tax Credit Withdrawn

When you receive a share dividend you used to have the dividend paid to you with a tax credit.  This was to allow for when a company makes profits it pays corporation tax.  The profits after corporation tax has been paid are either retained in the company as shareholder reserves or paid out to the owners i.e.  the shareholders as a dividend.

Dividends are therefore a share of company profits AFTER TAX (corporation tax).

As a personal income tax payer, your dividend has therefore already had 'corporation tax' paid i.e.  you have received a share of net profits but given the withdrawal of the tax credit, a system is now in place where you have a Tax Free Dividend Allowance and any dividends in excess of that are taxable.

For 2024 Tax Year

Tax Free Dividend Allowance £500.00

For dividend income received above this, it is charged to tax at a rate where the taxable income falls within the usual income tax bands

• Non Tax Payers - no further tax.
• Dividend in Basic Rate Tax Band (20.00%) - tax due at 8.75%.
• Dividend in Higher Rate Tax Band (40.00%) - tax due at 33.75%.
• Dividend in Additional Rate Tax Band (45.00%) - tax due at 39.35%.
• Note: all dividend tax rates were increased by 1.25% on 06/04/2022 to allow for the new Health & Social Care Levy given many owner managers take divdends rather than salary as pay remuneration.

Example: Barry receives a dividend cheque from Financial Advice.net shares of £10,000, these are the only shares he owns.

Is additional income tax due?

Barry deducts £500.00 tax free dividend allowance.  Taxable dividend is now £8,000 and he adds this to his gross income.

• If Barry's total income is still in the non-tax payer band e.g.  He still has a full Personal Tax Allowance £12,570.00), there is no tax due.

• If Barry is a Basic rate taxpayer (20.00%), tax is due at 8.75%  e.g.  £8,000 X 8.75%.

• If Barry is a Higher rate taxpayer  (40.00%), tax is due at 33.75%  e.g.  £8,000 X 33.75%.

• If Barry is an Additional rate taxpayer (45.00%), tax is due at 39.35%  e.g.  £8,000 X 39.35%

Don't forget the Capital Gains Tax Liability if you sell shares - Learn more in Capital Gains Tax

Request tax advice today.