Tax on Dividends Calculator
Taking dividends can be a tax efficient way to extract profits from your company in the long term. However, it’s important to understand the potential impact of tax on your dividends well looking at your finances, particularly in the UK. This is why our dividends tax calculator can be a valuable tool.
Using our Tax on Dividends Calculator
- Use the first slider on our Salary and Dividends Tax Calculator to adjust how much profit your company could make before being taxed.
- Use the second slider to adjust the gross salary (amount through payroll) that you would take from your company.
You will then be given these results from the salary and dividends tax calculator below:
- Expected Company Profits
- Gross salary
- Gross dividends
- Total remuneration before tax
- Corporation tax to pay
- Personal tax and NIC to pay
- Takehome annually
- Takehome monthly
Try out our Tax on Dividends Calculator
What are Dividends?
Dividends are a distribution of post-tax profits made by a company to its shareholders, usually on a quarterly or annual basis.
These payments are typically made in the form of cash, and are based on the company’s post-tax profits. Companies that have a strong financial position and a history of stable profits are more likely to pay dividends to their shareholders.
Tax on Dividends in the UK
In the UK, dividends taxation is a tax that is charged on the income earned from those dividends. The government views dividends as a form of investment income and a way to encourage investing and economic growth.
The amount of dividends tax that you owe depends on various factors, including your tax bracket, the amount of dividends that you receive and the tax laws within the UK. Understanding the impact of dividends tax on your finances can be a complicated process, which is where our dividends tax calculator can be a valuable tool to use.
UK Dividends Tax Brackets
In the UK, there are currently 4 tax brackets for dividends: the personal allowance rate, the basic rate, the higher rate and the additional rate. Here’s a breakdown of how much tax you will have to pay, depending on how much dividends your recieve.
Personal Allowance Tax Bracket: £0 – £12,570
Tax percentage: 0%
Basic Rate Tax Bracket: £12,571 – £50,270
Tax percentage: 8.75%
Higher Rate Tax Bracket: £50,271 – £125,140
Tax percentage: 33.75%
Additional Rate Tax Bracket: Over £125,140
Tax percentage: 39.35%
Salary Tax in the UK
Salary is taxed at a slightly different rate to Dividends. The four brackets still apply but you will be taxed at a higher rate than you would with dividends. For example, if you are in the basic rate tax bracket, you will be taxed 20% on your income, compared to 8.75% on your dividend intake. Below is a break down of income tax for 2023/24:
Personal Allowance Tax Bracket: £0 – £12,570
Tax percentage: 0%
Basic Rate Tax Bracket: £12,571 – £50,270
Tax percentage: 20%
Higher Rate Tax Bracket: £50,271 – £125,140
Tax percentage: 40%
Additional Rate Tax Bracket: Over £125,140
Tax percentage: 45%
National Insurance Contributions for Employees per month
Below is a break down of the amount of National Insurance Contributions employers will have to pay on their salary per month in the 2023/24 financial year:
Salary less than £12,570
Below £1,048 at 0%
Salary between £12,570 – £50,270
Above £1,048 at 12%
Salary above £50,270
Above £4,189 at 2%
National Insurance Contributions for Employers per month
Below is a break down of the amount of National Insurance Contributions employees will have to pay on their salary per month in the 2023/24 financial year:
Salary less than £9,096
Below £758 at 0%
Salary more than £9,096
Above £758 at 13.8%
Why do I need to use our Tax on Dividends Calculator?
If you’re a business owner in the United Kingdom, understanding the impact of taxes on your investments & business is crucial. One important tax to consider is the dividends tax, which is a tax on the income you receive from shares in UK companies you own or are invested in. To help you calculate this tax, using a dividends tax calculator can be incredibly useful. Here’s why you should use a dividends tax calculator.
1. You get accurate calculations as a starting point
The first reason to use a dividends tax calculator is to ensure accurate calculations. Calculating the dividends tax can be complex and time-consuming, particularly if you have multiple investments. By using a dividends tax calculator, you can quickly and easily determine the tax owed on your dividends, ensuring that you’re paying the correct amount and avoiding any penalties for underpayment.
2. They can save you time
Using a dividends tax calculator can save you a significant amount of time. Rather than manually calculating the tax owed on your dividends, you can simply input the necessary information into the calculator and get an instant result. This can be particularly helpful during the tax season when you may have other tax-related tasks to complete.
3. Our Tax on Dividends Calculator can help with planning
Another benefit of using a dividends tax calculator is that it can help you with tax planning. By understanding how much tax you’ll owe on your dividends, you can better plan for your tax payments and make any necessary adjustments to your investment strategy. For example, you may decide to invest in tax-free or tax-efficient investments to minimise the impact of the dividends tax.
4. Our Tax on Dividends Calculator can provide clarity
The UK tax system can be complicated, and understanding the dividends tax can be challenging. By using a dividends tax calculator, you can gain greater clarity and understanding of how the tax is calculated and how it impacts your investments. This can be particularly helpful if you’re new to investing in the UK or are unsure about how the tax system works.
5. They can keep you compliant
Using a dividends tax calculator can ensure that you remain compliant with tax laws. If you accurately calculate the dividends tax you owe on your investments, you can avoid any penalties for underpayments or non-compliance. This can give you peace of mind and help you avoid stress or financial strain.
Using a dividends tax calculator can be incredibly helpful for investors and business owners. By providing accurate calculations, saving time, helping with planning, providing clarity, being accessible, and keeping you compliant with UK tax laws, dividends tax calculators are an essential tool for any investor. If you’re an investor in the UK, be sure to use our dividends tax calculator to ensure that you’re paying the correct amount of tax and making informed investment decisions.
