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Tax on Dividends 2018/19

Tax on Dividends 2018/19

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What are dividends?

When you own shares in a company, and that company makes a profit, the profit may be distributed between shareholders. These are called dividends. Dividends must be paid out after all expenses, liabilities and outstanding company tax.

What is the dividend allowance?

Dividends are taxed after taking into account your other income sources that you may have, so this could include employment or property income. In previous tax years the allowance for tax free dividends was higher but for the tax year 2018/19 the allowance has been reduced.

  • 2016/17 = £5,000 dividend allowance
  • 2017/18 = £5,000 dividend allowance
  • 2018/19 = £2,000 dividend allowance

How are dividends taxed?

With the personal allowance now at £11,850 per year, the tax on dividends has now increased as the allowance has reduced from £5,000 to £2,000. Below shows the tax charge on dividends over £2,000 based on other income.

  • Personal allowance up to £11,850
    £2,000 tax free dividends

 

  • Basic rate from £11,850 – £46,350
    Dividends will be taxed at 7.50%
  • Higher rate from £46,350 – £150,000
    Dividends will be taxed at 32.50%

 

  • Additional rate more than £150,000
    Dividends will be taxed at 38.10%
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