What is the dividend tax rate in the UK?
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In short: 8.75% for basic-rate taxpayers, 33.75% for higher-rate, 39.35% for additional-rate. The first £500 of dividends each year is covered by the Dividend Allowance and taxed at 0%.
Dividends are paid on top of your other income. The £500 Dividend Allowance (reduced from £1,000 in April 2024) is tax-free but still uses up part of the tax band it sits in. Dividends inside an ISA or pension are tax-free and outside this regime.
Dividend income sits on top of all your other taxable income, so the rate you pay depends on which Income Tax band the dividends fall into — sometimes spanning more than one band.
Company directors paying themselves through small dividends from their own company are subject to the same rates. Combine with a £12,570 salary at the NI threshold for the typical owner-manager pattern.
Primary source: gov.uk/tax-on-dividends