This document provides details on: dividend nil rate band; dividend tax rates; UK dividends received by residents and non-residents; Overseas dividends taxed on arising and remittance basis; Interaction with temporary non-residence rules; reporting requirements.
A dividend is a distribution of profit by a company to its shareholders.
A dividend is not only a payment in cash. It can be the issue of new shares in exchange for forfeiting the right to a cash payment (a stock dividend). For more detail, see the Cash dividends and Non-cash dividends guidance notes.
For more on dividends from overseas resident companies, see the Foreign dividends guidance note.
The dividend tax regime fundamentally changed from 6 April 2016:
- the dividend tax credit was abolished, meaning the amount paid is the amount that is taxable; no grossing-up is required
- a dividend nil rate band of £5,000 per tax year was introduced, which applies irrespective of the marginal rate of the individual (reduced to £2,000 from 2018/19 onwards)
- the rates of tax on dividend income are: dividend ordinary rate of 7.5%, dividend upper rate of 32.5%, dividend additional rate of 38.1%. With the abolition of the dividend tax credit, this means an increase in the effective rate of tax within these bandings