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.
