What is Dividend Allowance?

The dividend allowance is the amount of dividend income a UK taxpayer can receive before paying dividend tax. It was reduced to £500 for 2024/25 and 2025/26, down from £2,000 in 2022/23. Dividends above the allowance are taxed at 8.75% (basic rate), 33.75% (higher rate) or 39.35% (additional rate) — all higher than equivalent savings rates. Company directors who pay themselves partly through dividends must track their allowance carefully, particularly when dividends combine with other income. Dividends are paid from post-corporation-tax profits and do not attract National Insurance.