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Dividend factsheet


From April 2016, Dividend Tax Credits will be replaced by the new £5000 tax-free Dividend Allowance.

The tax band rates on Dividends above £5,000 will be taxed as follows:

Tax Band Rate Threshold
Basic Rate Tax Band 7.50% £32,000
Higher Rate Tax Band 32.50% £43,000
Additional Rate Tax Band 38.10% £150,000


Dividends derived from pension funds and ISA’s which are currently exempt from tax will remain so.

A simple example of how the system might work is set out below:

Type of earnings Amount Tax free Taxable Tax Rate Total Tax
All non-dividend earnings £18,000 £11,000 £7,000 20% £1,400
Dividend Earnings (Outside of ISA) £22,000 £5,000 £17,000 7.50% £1,275
Income tax due for the period 2016-2017 £2,675


For further details on this, and other topics that might affect you, please feel free to contact WCC for advice.

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