Dividend tax calculator
Tax on dividend income, with any tax-free allowance and the rate for your band.
Dividend tax
Estimate$2,531.00
33.75% on 7,500 above the allowance
- After tax
- $5,469.00
- Dividend allowance
- $500.00
- Effective rate
- 31.64%
| Dividends received | $8,000.00 |
|---|---|
| Dividend allowance | -$500.00 |
| Taxed at 33.75% | -$2,531.00 |
| After tax | $5,469.00 |
- The allowance is £500, down from £2,000 in 2022-23, so far more small shareholders now owe something.
- Dividends inside an ISA or pension are outside this entirely and need no reporting.
On £8,000 of dividends the first £500 is free and £7,500 is taxed at 33.75% for a higher-rate taxpayer, around £2,531.
How this is calculated
How this is calculated
Dividends often have their own rates
The UK taxes them at 8.75%, 33.75% and 39.35% rather than the ordinary 20%, 40% and 45%, on the basis that corporation tax has already been paid on the underlying profit.
tax = (dividends − allowance) × band rateTax-free allowances have been shrinking
The UK dividend allowance fell from £2,000 in 2022-23 to £500 now, so a 4% portfolio crosses it at £12,500 of holdings rather than £50,000.
Your band depends on total income
Dividends are stacked on top of other income to decide the rate, so a £45,000 salary plus £8,000 of dividends pushes part of those dividends past the £50,270 higher-rate threshold even though neither figure alone would.
Worked example: £8,000 of dividends, higher-rate taxpayer
| Dividends | £8,000 |
|---|---|
| Band | Higher |
| Allowance | £500 |
|---|---|
| Tax | about £2,531 |
Dividend rates and allowances differ by country. Pick a country above for the treatment that applies to you.
What this assumes
- Dividends held outside a tax wrapper.
- Your marginal band is already known.
- Resident individual, not a company.
- No foreign withholding tax credited.
Where this commonly goes wrong
- Reinvested dividends inside accumulation funds are still taxable even though no cash arrives.
- Above a reporting threshold you may need to file a return rather than have the tax collected automatically.
- Foreign dividends often suffer withholding tax at source, only part of which is usually recoverable.
Questions
How are dividends taxed?
In the UK at 8.75%, 33.75% or 39.35% depending on your band, after a £500 allowance. Rates are lower than ordinary income tax because corporation tax has already been paid on the profits.
Is there a tax-free amount?
In the UK, £500 a year — down from £2,000 in 2022-23. At a 4% yield that threshold is reached with just £12,500 of holdings, so many small investors now owe something.
Are dividends inside a tax wrapper taxed?
Generally not. UK dividends inside an ISA or pension attract no dividend tax and need no reporting, which usually outweighs small differences in platform cost.
Why are dividend rates lower than wage tax rates?
Because the company has already paid corporation tax on the profits being distributed. The UK sets dividend rates at 8.75%, 33.75% and 39.35% against ordinary rates of 20%, 40% and 45% to avoid taxing the same money twice at full rates.
Do reinvested dividends still count?
Yes. Accumulation funds reinvest distributions automatically, but they remain taxable income in the year they arise, so tax can be due on money that never reached your bank account.
Related tools
Sources
General estimate based on published HMRC rates for the current period. Not tax advice. Confirm your position with HMRC or a qualified adviser.
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