Dividend Tax Calculator UK 2024/25
Calculate tax on dividends from your limited company. Includes personal allowance, dividend allowance, and all current UK tax rates for accurate calculations.
Dividend Tax Calculator 2024/25
UK Dividend Tax Rates for 2024/25:
- Dividend allowance: £500 (tax-free)
- Basic rate: 8.75% (income up to £50,270)
- Higher rate: 33.75% (income £50,271 to £125,140)
- Additional rate: 39.3% (income over £125,140)
Important Notes:
- This calculator uses 2024/25 tax rates and allowances
- Dividends are taxed after salary and other income
- Personal allowance reduces by £1 for every £2 over £100,000
- Consider pension contributions to reduce taxable income
- Scottish and Welsh taxpayers may have different rates on non-dividend income
Understanding Dividend Taxation in the UK
Dividends are payments made by limited companies to their shareholders from profits after corporation tax. Understanding how dividends are taxed is crucial for business owners and investors to optimise their tax position.
How Dividend Tax Works
Dividends are taxed differently from employment income. They don't attract National Insurance contributions, making them tax-efficient for company directors. However, dividend tax rates have increased significantly in recent years.
Dividend Tax Rates 2024/25
| Tax Band | Rate |
|---|---|
| Dividend Allowance | 0% (£500) |
| Basic Rate | 8.75% |
| Higher Rate | 33.75% |
| Additional Rate | 39.3% |
Tax Band Thresholds
- •Personal Allowance: £12,570(reduces by £1 for every £2 over £100,000)
- •Basic Rate: Up to £50,270
- •Higher Rate: £50,271 to £125,140
- •Additional Rate: Over £125,140
Salary vs Dividend: Key Considerations
Advantages of Dividends
- • No National Insurance contributions
- • Flexibility in timing of payments
- • Can be more tax-efficient at certain income levels
- • No employer's NI (13.8%)
Advantages of Salary
- • Counts towards state pension
- • Corporation tax deductible
- • Builds employment history
- • Qualifies for certain benefits
Tax Planning Strategies
Optimal Salary Level
Many directors take a salary at the National Insurance threshold (£12,570) to maximise tax efficiency while maintaining state pension contributions.
Dividend Timing
Consider spreading dividends across tax years or timing them when your other income is lower to stay within lower tax bands.
Pension Contributions
Company pension contributions can reduce corporation tax and provide tax-free extraction of profits, though subject to annual allowance limits.
Share with Spouse
If your spouse has a lower income, consider making them a shareholder to utilise their lower tax bands and allowances.
Frequently Asked Questions
When do I pay tax on dividends?
Dividend tax is paid through Self Assessment. You must register for Self Assessment by 5 October following the tax year you received dividends. Payment is due by 31 January following the end of the tax year.
Can I pay dividends if my company makes a loss?
No, dividends can only be paid from accumulated realised profits. Paying dividends when insufficient profits exist is illegal and directors may need to repay them. Always check your company has sufficient distributable reserves.
What is the dividend allowance?
The dividend allowance is £500 for 2024/25 (reduced from £1,000 in 2023/24). This is the amount of dividend income you can receive tax-free, regardless of your other income. It's in addition to your personal allowance.
How are dividends taxed if I have no other income?
If dividends are your only income, you can receive £12,570 (personal allowance) plus £500 (dividend allowance) = £13,070 tax-free. Dividends above this are taxed at 8.75% up to £50,270 total income.
Do I need to keep dividend vouchers?
Yes, you must issue dividend vouchers for each dividend payment showing the date, dividend amount, and shareholder details. Keep these for at least 6 years as HMRC may request them during an enquiry.
Need Help with Dividend Tax Planning?
Our expert accountants can help you structure your remuneration efficiently, combining salary and dividends to minimise your overall tax liability.