Use our dividend calculator to determine how much tax you’ll pay on dividends based on your current salary and annual dividend income.
-
Simple input fields for salary, dividend income, and tax year selection.
-
Automatic tax rate and bracket determination based on UK allowances.
-
Displays estimated take-home income after dividend tax adjustments.
Dividend Income after Tax
£0.00
£0.00
£0.00
£0.00
£0.00
You can only enter salary and dividend values to keep the calculations as simple as possible. If you have any additional income streams (such as rental income or other investments), please ask your accountant to create a personalised tax illustration if you have extra income streams. The calculator assumes your tax code is 1257L, and you are eligible for the entire £12,570 Personal Allowance.
-
Dividends are payments made to shareholders, including directors, from a company’s profits as a return on their investments. Unlike PAYE income, dividends are not taxed at source.
-
Dividends from shares held in an ISA are tax-free and do not affect your dividend allowance.
-
Dividend tax is calculated after applying the personal allowance (if dividends are your only source of income) or/and the dividend allowance. Any income above these allowances is subject to the relevant dividend tax rate based on your income bracket.
-
Your dividend rate is determined based on your residency rather than your place of work.
What is the most tax-efficient way for limited company directors to draw profits from a business?
Limited company directors can withdraw profits efficiently by combining a director’s salary with dividend payments. A common approach is to take a salary up to the personal allowance threshold of £12,570. This allows the director to avoid paying income tax and keeps the salary below the National Insurance Primary Threshold, meaning no National Insurance contributions (NICs) are due. Any profits above this threshold can be withdrawn as dividends, which are more tax-efficient as they are not subject to NICs and benefit from the dividend allowance.
Find out more: What Is the Role and Duties of a Company Director?
Dividends are particularly tax-efficient because they do not attract NI contributions. The allowance covers the first £500 of dividend income, meaning it is tax-free. After this allowance, dividend tax brackets are lower than income tax rates, making this a cost-effective way for directors to receive income from their company.
Start your company with good vibes! We plant a tree on your behalf, a new tree planted with every new client order.
Subscribe Newsletter
When is the 2024 HMRC deadline for filing self assessment tax return for company directors?
As a company director, you must pay tax on the excess if your dividend income exceeds the tax-free allowance. If your dividend income is below £10,000, you do not need to register for self-assessment; instead, you can report this income and pay tax through alternative means, such as contacting HMRC’s helpline or adjusting your tax code so the tax can be collected through your salary or pension.
However, if you are registered for Self Assessment, you must include any dividend income in your tax return. If your dividend income exceeds £10,000, you are required to file a Self Assessment tax return. The deadline for filing your online Self Assessment is 31 January following the end of the tax year, while the deadline for paper submissions is 31 October of the same year.
How do I determine my tax bracket for dividend income?
To determine your tax bracket for dividend income, you first need to consider your total income, including salary and dividends.
Here’s how to calculate it:
-
Add salary to your dividend income together to get your total income.
-
Subtract your personal allowance (currently £12,570, if applicable) from your total income.
-
The remaining amount will determine your tax bracket for dividends:
-
Basic rate band (8.75 %): Up to £50,270
-
Higher rate (33.75 %): £50,271 to £125,140
-
Additional rate (39.35 %): Above £125,140
-
Once you input your salary and dividend details, our calculator can quickly determine your tax bracket and dividend tax percentage, ensuring accurate results.
What is the dividend allowance for the current tax year?
The allowance for the 2024-25 tax year is £500, reduced from £1,000 in the previous tax year (2023-24). You can earn up to £500 in dividend income before paying any tax. Any dividends above this amount will be taxed based on your income tax bracket.
How does the dividend tax calculator determine the income tax payable on my dividends?
To calculate the tax payable on your dividends, follow these steps:
-
Determine your total income, including any salary (PAYE) if applicable.
-
Add your salary and dividend income together.
-
Subtract your Personal Allowance (or any other applicable allowances) from your total income. The remaining amount will determine which tax bracket you fall into for dividends.
Once you know your tax bracket, take your total dividend income, subtract the dividend allowance, and apply the relevant tax rate based on your bracket.
What are the dividend tax rates 2023/24 and 2024/25?
Since dividends are unearned income, like income from investments, property, or pensions, they are not subject to NI contributions, primarily a tax on earnings from employment or self-employment. However, dividends are still subject to dividend tax, which depends on your total income and tax bracket.
How does my tax code affect my dividends?
Your dividend income can impact your tax code. If your total income, including dividends, exceeds the personal and dividend allowances in a particular year, you may need to notify HMRC. They can adjust your PAYE tax code to account for the additional tax owed on your dividends, ensuring the correct amount is collected through your salary.
Do I need to pay national insurance tax on dividends?
You do not need to pay National Insurance on dividend income, as dividends are not considered earnings for tax purposes. National Insurance contributions apply only to income from employment or self-employment, not to unearned income like dividends.
How does capital gains tax differ from dividend tax, and when might it apply to company directors?
Capital Gains Tax applies when an individual sells an asset, such as shares, for a profit. This tax is based on the profit made from the sale, not the total sale value. On the other hand, Dividend Tax applies when a shareholder earns money through dividends, which are payments made from a company’s profits after corporation tax has been levied.
For company directors, capital gains tax may apply if they sell shares, while dividends may be applied when they receive dividends from the company’s profits.
Disclaimer: This calculator is for illustrative purposes only and provides estimates based on general information. It should not be considered as tax advice. For personalised and accurate guidance, please consult a qualified tax advisor.
