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Beware higher tax rate on dividends

Beware higher rate tax on dividends

11 January 2024

Readers are reminded that if the dividends they draw from their company, when added to their other income, exceeds the basic rate Income Tax Band, then much higher rates of dividend tax will apply. The tax rates for dividends received (in excess of

Beware that drawing dividends exceeding the basic rate Income Tax Band, when combined with other income, leads to higher dividend tax rates.

For dividends received (beyond the £1,000 allowance):

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

Additionally, beware that dividends within your Personal Allowance won’t contribute to your allowance, and you may face multiple tax rates.

If you get up to £10,000 in dividends, request HMRC to change your tax code. They’ll deduct tax from your wages or pension, or report on your self-assessment if you’re under self-assessment. No need to notify HMRC if dividends are within your allowance.

For dividends exceeding £10,000, complete a self-assessment tax return. If not a regular filer, register by October 5 after the tax year of relevant dividend income.

Source: HM Revenue & Customs Tue, 09 Jan 2024 00:00:00 +0100

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