Taxation on dividends in the United Kingdom (UK) is dependent on the individual's tax bracket. Dividends are taxed at different rates depending on whether they are classified as basic rate, higher rate or additional rate. The tax rates for the tax year 2022/23 are as follows:
- Basic rate taxpayers (income up to £50,270) pay 7.5% tax on dividends.
- Higher rate taxpayers (income between £50,271 and £150,000) pay 32.5% tax on dividends.
- Additional rate taxpayers (income above £150,000) pay 38.1% tax on dividends.
However, there is also a tax-free dividend allowance of £2,000 for all taxpayers, regardless of their tax bracket. If your dividends are less than this amount, you won't have to pay any tax on them.
It's important to note that this tax only applies to dividends from shares and not to other types of investment income such as interest or rental income. Additionally, dividends from tax-free savings accounts such as ISAs are also exempt from this tax. It's important to consult with a tax professional to determine your exact tax obligations on dividends in the UK.
