Dividend tax rates 2022-2023 – The Toast blog

Dividend tax rates 2022-2023

Dividend Tax Rates

If you weren’t already aware, last week there were a number of announcements made by the Chancellor in the Autumn Budget 2021. One of the announcements was that there would be an increase in dividend tax by 1.25% from the 6th April 2022 in order to fund the health and social care sector. 

So, what is a dividend? A dividend is quite simply a share of the profits between a company’s shareholders. This tax hike means that shareholders will have to pay more on these shares of profits. See below for how much you should expect to pay depending on your tax band:

Basic rate band: The dividend tax rate will increase from 7.5% in 2021-22 to 8.75% in 2022-23.

Higher rate band: The dividend tax rate will increase from 32.5% in 2021-22 to 33.75% in 2022-23.

Additional rate band: The dividend tax rate will increase from 38.1% in 2021-22 to 39.35% in 2022-23.

There is also a tax-free dividend allowance of £2,000 which means you won’t have to pay dividend tax on the first £2,000 you receive in dividend income.

And finally, there are certain shares you don’t pay dividend tax on. These include shares held in:

  • Stocks and shares ISA
  • Junior ISA
  • Lifetime ISA
  • Self-invested pension plan (SIPP)

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