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An outline of the changes to the rules regarding dividends.
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:
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.
This example, based on 2023/24 tax rates and allowances, shows the taxable amounts.
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%.
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