Dividend Taxation

27 - 04 - 2021

Are the dividends I receive taxable?




Income tax is calculated on your total taxable income. Add your income from dividends to your other taxable income

At what tax rate are dividends taxed?


Tax Year 2021/22                      Band                                Tax Percentage


Starting Rate                         £0 - £2,000                                    0%

Basic Rate                      £2,001 - £37,500                               7.5%

Higher Rate                  £37,501 - £150,000                            32.5%

Additional Rate                 Over £150,000                               38.1%


Scottish rates and bands for dividends only will remain the same as the rest of the UK


For example:


You receive a salary of £8,632 and dividends of £20,000.


2021/22 Tax Year Calculation                                                                             2021/22


Salary                                                                                                                       8,632

Dividend received                                                                                                  20,000


Personal Allowance                                                                                               12,500


Taxable Income                                                                                                      16,132


Does a Shareholder have to pay tax and NI?


Initially there is no tax to pay at the time of payment of the dividend.


However the dividend received by the shareholder is taxable under income tax as it forms part of the taxable income for the year.


The rate of tax payable depends on the “slice” of income the dividend represents.


Dividend Tax Rate


Basic Rate 7.5%

£2,000 - £37,500

Higher Rate 32.5%

£37,501 - £150,000



If you would like to discuss any of the issues noted above please contact us on:


01244 625 500 or 01978 364 000


Whilst all due care and attention has been taken in the preparation of these notes no liability

can be accepted for any omission or item contained therein.


Foremans LLP

April 2021






Foremans LLP Umberlla
Foremans LLP