Chalmers HB can help taxpayers with any queries you have regarding dividends – here is an overview of the Dividend Allowance scheme...
From 2023/24 a person does not have to pay tax on the first £1,000 of dividend income, regardless of the level of non-dividend income. This Dividend Allowance has reduced from £2,000 in 2022/23 and will decrease further to £500 in April 2024.
For 2023/24 tax is charged on dividends received over £1,000 at the following rates:
- 8.75% on dividend income within the basic rate band
- 33.75% on dividend income within the higher rate band
- 39.35% on dividend income within the additional rate band.
The Dividend Allowance does not reduce total income for tax purposes, and dividends within the allowance still count towards the appropriate basic or higher rate bands. They may therefore affect the rate of tax payable on dividends received in excess of the £1,000 allowance.
Example 1
This example, based on 2023/24 tax rates and allowances, shows the taxable amounts.
| |
Non-Dividend Income
£ |
Dividend Income
£ |
|
|
18,000
|
22,000
|
|
Personal Allowance
|
12,570
|
|
|
Taxable at basic rate (20%)
|
5,430
|
-
|
|
Taxable at 0% (dividend allowance)
|
|
1,000
|
|
Taxable at 8.75%
|
|
21,000
|
Example 2
This example shows a higher rate taxpayer. The Dividend Allowance uses up some of the basic rate band and so less is available to be taxed at 8.75% rather than 33.75%.
| |
Non-Dividend Income
£ |
Dividend Income
£ |
|
|
35,000
|
19,000
|
|
Personal Allowance
|
12,570
|
-
|
|
Taxable at basic rate
|
22,430
|
-
|
|
Taxable at 0% (dividend allowance)
|
-
|
1,000
|
|
Taxable at 7.5% (up to remaining basic rate band)
|
-
|
14,270
|
|
Taxable at higher rate (32.5%)
|
-
|
3,730
|
Chalmers HB can advise businesses on a range of tax issues relating to dividends. Please contact us for more information.