Use our easy-to-use Dividend Tax Calculator to estimate your dividend tax liability for the current tax year. Simply enter your dividend income, salary, and any other relevant figures to get an accurate calculation of your tax obligations.
Our calculator helps you understand how dividends are taxed based on the income tax bands and thresholds applicable to UK taxpayers. The results break down the amount of tax payable across different tax bands, ensuring clarity on how much you owe.
Start your calculation now and plan ahead for your tax payments.
| Description | Amount (£) |
|---|---|
| Your Total Income | 0.00 |
| Total Taxable Income | 0.00 |
| Tax on Salary | 0.00 |
| Employee's NIC | 0.00 |
| Total Dividend Tax | 0.00 |
| Employer's NIC | 0.00 |
| Total Tax + NIC | 0.00 |
| Take Home Pay | 0.00 |
Dividends in the UK are payments made by a company to its shareholders, typically from the company’s profits, as a reward for investing in the business. When a limited company generates a profit, it shares these profits with stakeholders after deducting all business expenses, taxes, and liabilities. This distribution of a portion of the company’s earnings is known as dividends.
Many UK contractors trade through a limited company and work as its director. They are usually paid through a combination of salary and dividends, enabling them to optimise their income tax and National Insurance Contributions (NICs) while utilising personal allowances effectively.
Dividend tax is a tax paid on income received from dividends, which are payments made by companies to their shareholders. In the UK, dividends are taxed separately from other types of income, like salary or wages. The amount of tax you pay depends on your total income and the dividend tax rates set by the government.
The first portion of your dividend income is tax-free, known as the dividend allowance. For the year 2024/25, the dividend allowance is £500. Any income above this allowance is taxed as per the income tax band. The rates for dividend tax vary, with lower rates for basic income earners and higher rates for those in higher income tax bands. It’s important to declare your dividend income on your Self Assessment tax return, even if no tax is due.
| Tax Band | Income Range | Dividend Tax Rate |
|---|---|---|
| Basic Rate | £0 – £37,700 | 8.75% |
| Higher rate | £37,701 – £125,140 | 33.75% |
| Additional rate | Over £125,140 | 39.35% |
For the year 2024/25, the dividence allowance is £500. This means you can earn up to £500 in dividend income without paying any tax on it. In 2023/24, it was £1000. During the year 2022-23, it was £2,000. The tax-free dividend allowance has shrunk significantly from £5,000 when it was first introduced in 2016 to now £500.
The decrease in allowance results in increased tax liability, especially to those who rely on income through dividends. On the positive side, it is also worth noting that you don't have to pay National Insurance Contributions (NIC) on dividend payments.
| Tax Band | Income Range | Tax Rate |
|---|---|---|
| Personal Allowance | £0 – £12,570 | 0 |
| Basic Rate | £12,571 – £50,270 | 20% |
| Higher rate | £50,271 – £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Dividend tax is calculated based on the applicable tax rates and thresholds. Let’s explore how this works through some examples:
Fiona is the sole Director and only shareholder of his Limited Company, Example Limited. His company made a profit of £4,500, which he decides to distribute entirely as a dividend payment to the shareholders. Since Peter is the only shareholder, he receives 100% of the dividend.
As Fiona has received a dividend payment, he is required to declare this income on his Self Assessment tax return. However, since the first £500 of dividend income is tax-free under the dividend allowance, and his remaining dividend income falls within his personal allowance, Peter is not required to pay any dividend tax.
In the below example, we look at how Adam’s salary and dividend income are taxed using the 1257L tax code in the UK. The 1257L tax code provides a personal allowance of £12,570, which means John can earn this amount before paying any income tax.
We’ll break down how his salary of £30,000 and dividend income of £6,000 are taxed, highlighting the dividend tax allowance and the rates applicable to both types of income. This example will help clarify how different income sources are taxed and the impact of the dividend allowance on Adam’s overall tax liability.
Income Details:
Tax Calculation Breakdown
1. Salary Income:
2. Dividend Income:
Total Tax Payable
Adam’s total tax payable would be £3,967.25, with £3,486 coming from his salary income and £481.25 from his dividend income. This assumes he is within the basic-rate tax band for dividends.
Want to find out how much dividend tax you'll pay? Use our easy-to-use Dividend Tax Calculator for a quick and accurate estimate! This tool helps you figure out the tax on your dividend income, making it easier to plan your withdrawals from your limited company throughout the year. Take control of your finances and make informed decisions with our straightforward and effective Dividend Tax Calculator.
If you need a specialist limited company accountant, then get in touch with our Top Contractor Accountants. For any umbrella company related help, you can have a look at our Best Umbrella Companies. Alternatively, you can email us on [email protected], and we'll be more than happy to help.