If you have shares in a company, either your own or another, then you may receive a dividend payment. Tax may be payable on these dividends if it is above your dividend allowance for that tax year.
The dividend allowance,
- 6 April 2018 to 5 April 2019 – £2,000
- 6 April 2017 to 5 April 2018 – £5,000
- 6 April 2016 to 5 April 2017 – £5,000
The tax you pay depends on which Income Tax Band (those below are 2018/19 Bands) you are in,
- Basic rate (£11,851 – £46,350 taxable income) – 7.5%
- Higher rate (£46,351 – £150,000 taxable income) – 32.5%
- Additional rate (over £150,000 taxable income) – 38.1%
You need to add your income from dividends to any taxable income you receive to work out your tax band. Tax could be payable at more than one rate and any dividends that fall within your Personal Allowance (i.e. up to £11,850) do not count towards your dividend allowance.
For example, £3,000 is paid in dividends in the 2018/19 tax year. The dividend allowance is £2000 therefore the remaining £1000 is taxable. Your taxable income is £35,000 and with your £3000 dividend gives a total taxable income of £38,000. Therefore you pay 7.5% on £1000 of dividends as your total taxable income is within the basic tax band.
How you pay this tax depends on the amount of dividend income you receive in the tax year.
Up to £10,000 dividends
Tell HMRC by,
- Contacting the helpline 0300 200 3300
- Asking HMRC to change your tax code – the tax will then be taken from your wages or pension through PAYE
- Completing a Self Assessment tax return, if you already complete one.
If the dividends you receive are within your dividend allowance for the tax year then you do not need to inform HMRC.
Over £10,000 dividends
You will need to complete a Self Assessment tax return. If you have not completed one before you need to register by 5 October following the tax year you had the income.
If you need further information or help on this then please get in touch 0113 286 4486.
Source: HMRC
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