Accessibility links

Tel: 44 (0) 1992 715804 - Fax: 44 (0) 1992 650933 - Email: enquiries@connorwarin.co.uk

Dividend nil-rate

  1. Resources
  2. Your money
  3. Personal taxation

Connor Warin can help taxpayers in the Waltham Abbey area with queries you have regarding dividends – here is an overview of the new Dividend Allowance scheme...

A person does not have to pay tax on the first £2,000 of dividend income, regardless of the level of non-dividend income. Tax is charged on dividends received over £2,000 at the following rates:

  • 7.5% on dividend income within the basic rate band
  • 32.5% on dividend income within the higher rate band
  • 38.1% 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 £2,000 allowance.

Example 1

This example, based on 2020/21 tax rates and allowances, shows the taxable amounts.

  Non-Dividend Income
£		 Dividend Income
£
  18,000 22,000

Personal Allowance

12,500
Taxable at basic rate (20%) 5,500 -
Taxable at 0% (dividend allowance) 2,000
Taxable at 7.5% 20,000

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 7.5% rather than 32.5%.

  Non-Dividend Income
£		 Dividend Income
£
  35,000 19,000
Personal Allowance 12,500 -
Taxable at basic rate 22,500 -
Taxable at 0% (dividend allowance) - 2,000
Taxable at 7.5% (up to remaining basic rate band) - 13,000
Taxable at higher rate (32.5%) - 4,000

Connor Warin can advise businesses in the Waltham Abbey area on a range of tax issues relating to dividends. Please contact us for more information.

Why not register to receive our Monthly Newswire?

Once a month we'll send you an email packed full of essential business news and handy tax tips to help save you money.

Sign up now

30 Jul 2021

Data reveals nearly two million workers remain on furlough scheme

Ahead of the Coronavirus Job Retention Scheme (CJRS) being wound down over the summer, data published by HMRC has revealed that almost two million workers remain on furlough.

29 Jul 2021

ICAEW urges HMRC to scrap exemptions to simplify VAT rules

In response to HMRC's consultation on simplifying the rules relating to land and property, the Institute of Chartered Accountants in England and Wales (ICAEW) has urged HMRC to abolish all VAT exemptions and remove all VAT options.

28 Jul 2021

Public trust in charities reaches highest level since 2014

Public trust in charities has reached its highest level since 2014, according to research published by the Charity Commission.