How is a dividend taxed?

A dividend is paid out of company’s profit after corporation tax and VAT. It doesn’t affect company’s tax position, which means it is not tax allowable expense. As it is payable to shareholders after taxes, the company is not liable to any additional costs.

The shareholders are liable to pay income tax on any dividends received. Currently, the first £2,000 (tax year 2019/20) of dividends is taxed at 0%, then the dividends within Basic Rate threshold are taxable at 7.5%, within Higher Rate threshold at 32.5% and above that in Additional Rate threshold at 38.1%. Please check the latest tax tables for updated thresholds and tax bands.

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