Dividend allowances

Reviewed by Mike Parkes, technical director at GoSimpleTax.

Tax rates on dividends

The HMRC dividend allowance means that you can receive a limited amount of dividends tax-free. Above that limit, special rates of tax apply. Dividends on any shares held in an ISA are also tax-free

The tax treatment of dividends has changed several times in recent years, so it’s important to make sure you understand the current rules.

Tax-free dividend allowance

The dividend allowance is £500 (2024/25). There is no tax to pay on dividend income up to the allowance - regardless of how much other income you have.

Dividend tax rates

For higher amounts of dividends, the rate of tax depends on your total income - including other, non-dividend income:

  • the first £500 of dividend income is still tax-free;
  • any extra dividend income within the basic rate band of up to £50,270 for someone with a personal allowance of £12,570 is taxed at 8.75%;
  • for dividends that fall within the higher rate band (up to £125,140), the rate is 33.75%;
  • for dividends in the additional rate band, the rate is 39.35%.

Declaring dividend income

If you already complete a self assessment tax return, you must include dividends in this. You need to declare the total dividends received, even if the amount is less than the dividend allowance.

If you do not normally complete a self assessment tax return:

You do not need to declare (or pay tax on) any dividends from ISAs.

You can find dividend allowances for previous years on the GOV.UK website.

Content reviewed by Mike Parkes, technical director, GoSimple Software

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