Dividend Tax Calculator
Calculating the Income Tax Which is Payable on Your Dividends
Calculating the Income Tax Which is Payable on Your Dividends
With the use of our Dividend Tax Calculator, you are able to discover how much income tax you will be paying with the input of your current salary and the annual dividend payments that you make. This calculator has been updated for the 2022-23 tax year.
To use our calculator, simply:
- Enter the total amount of your salary which has been put through your limited company (if you're unsure, you will be able to find out on your P60).
- Enter any additional income that you have gained that hasn't been put through your limited company (this includes financials such as rental income, pensions, or interest on a bank account).
The amount that you are given is the amount of dividends that you have drawn from your limited company.
New Dividend Calculation from the tax year 2016/2017 onwards
As of the tax year 2016/17, this new calculation will be in place for calculating your dividend. There is no longer a 10% notional tax credit and an allowance of £5,000 tax free dividend allowance has been added to the system.
Updated April 2018: From 6 April 2018 the Dividend Allowance reduced to £2,000.
The dividend tax rates for dividends that exceed the set allowance are:
- 8.75% of Dividend Income for income within the Basic Rate band of 20%
- 33.75% of Dividend Income for income within the Higher Rate band of 40%
- 39.35% of Dividend Income for income within the Additional Rate band of 45%
It's important to note that these bands are not separate Dividend bands and that the introduction of the allowance has not been incorporated for use in the Dividend Tax calculation.
Single Shareholder Companies and Director Companies
Due to the addition of the £2,000 0% allowance, this new calculation has become increasingly difficult for some to understand.
The simplest explanation I can give is that for the majority of shareholders and directors, this dividend allowance will reduce the taxable dividend within the Basic Rate band of income tax.
Income Tax Rates and Bands 2022/23
| Income Tax Band | Tax Rate | Income Range |
|---|---|---|
| Personal Allowance | 0 % | £0 to £12,570 |
| Basic Rate | 20 % | £12,571 to £50,270 |
| Higher Rate | 40 % | £50,271 to £150,000 |
| Additional Rate | 45 % | over £150,000 |
It's important to note that tax regulations require that before any unused personal allowance is set off against dividends, the personal allowance must first be set against the salary.
For example, if a shareholder or director were to receive an annual salary of £10,000 and a dividend of £45,000, then the following would apply:
| Salary | £10,000 | A | |
| Dividend | £45,000 | B | |
| Total Income | £55,000 | C (A+B) | |
| Personal Allowance | £12,570 | D | (Income Tax Bands) |
| Taxable Dividend | £42,430 | E (C-D) | |
| Dividend Taxed in the Basic Rate Band | £37,700 | F | (Income Tax Bands) |
| Dividend Allowance | £2,000 | G | |
| Dividend taxed in the Basic Rate Band | £35,700 | H (F-G) | @ 8.75% = £3,123.75 |
| Dividend taxed in the Higher Rate Band | £4,730 | I (E-F) | @ 33.75% = £1,596.38 |
| Total Tax on Dividends: | £4,720.13 |
Due to how the salary in the example above is lower than the individuals personal allowance, all of their taxable income is their dividend.