Taxation of Dividend Income

Gary Hughes

Special Projects Manager

Taxation of dividend income

When a dividend is paid to an individual, it is subject to different tax rates compared to other income. To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed.

The current tax rates (December 2018) on dividend income are as follows:

  • On the first £2,000 of dividend income received there is a zero tax rate due to the dividend allowance
  • Basic tax ratepayers will pay 7.5% on dividend income
  • Higher rate taxpayers will pay 32.5% on dividend income
  • Additional rate taxpayers will pay 38.1% on dividend income


Basic rate taxpayers need to appreciate that all dividends received still form part of the total income of an individual. If dividends above £2,000 are received, the first £2,000 will use up some or all of the basic rate band available. The element of dividends above £2,000 which are taxable may well therefore be taxed at 32.5%.

For further information

For expert advice please contact our Tax experts at Hallidays on 0161 476 8276 or email


While we have made every effort to provide accurate and up to date information on our website, the law is constantly changing and affects each person or business in different ways. Read our disclaimer.

Updated December 2018

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