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Dividend tax rates for the 24/25 Tax year


A Sole trader paying tax

What are dividends?

Dividends are a type of income received from a limited companies profits, to its shareholders. Most small business owners, who run a limited company, will take their income in a tax efficient way, which is a mixture of directors salary and dividend income.

You may also receive dividends from investments throughout the year, such as a Stocks and Shares portfolio.


How much can I take and how often can I take dividends?

The amount of dividends you take from a limited company, and the timing of this, will vary from company to company. The main rule is that there are enough profits AFTER corporation tax has been deducted, for a dividend to be declared. It is recommended to speak to your accountant, or get in touch, to ensure you are taking dividends in the most tax efficient way.


Important dates

Any dividend income you take, in excess of the dividend allowance (see below), must be declared on a self-assessment.

The UK tax year for individuals runs from 6th April - 5th April each year. The Self-assessment deadline is always the 31st January following the tax year end.

For the 24/25 tax year, this will cover dividend income declared between 6th April 24 - 5th April 25, and you would have until 31st January 26 to arrange to report and pay taxes on any dividend income received.


Dividend allowance

Each tax year, an individual is given a dividend allowance tax free. This is as follows :


23/24 : £1,000 - The first £1,000 of dividend income for an individual is tax free. Any dividends over this are subject to dividend tax and a self-assessment must be filed.


24/25 : £500 - The first £500 of dividend income for an individual is tax free. Any dividends over this are subject to dividend tax and a self-assessment must be filed.


Dividend tax rates

The table below gives the dividend tax rates and thresholds for the 24/25 tax year, with the 23/24 tax year also included.


The rates are the same for England, Wales, Scotland and Northern Ireland :

Tax Rate

2023/24


Tax Band Threshold

2024/25


Tax Band Threshold

Personal allowance: How much income you can earn before you start to pay income tax. No tax on this income.

£0 – £12,570

£0 – £12,570

Basic rate income tax: 8.75% tax on the proportion of income which falls into this tax bracket.

£12,571 – £50,270


8.75%

£12,571 – £50,270


8.75%

Higher rate income tax: The part of your income which falls into this tax band is taxed at 33.75%

£50,271 – £125,140


33.75%

£50,271 – £125,140


33.75%

Additional rate income tax: This is the highest rate. The income you earn above this threshold is subject to tax at 45%

£125,140 upwards


39.35%

£125,140 upwards


39.35%

 

National insurance

Dividends are not subject to National Insurance.



If you would like support on anything raised or to see how HPC Accountancy could support you and save you tax, get in touch today!


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