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Tax on dividends

Dividends are subject to income tax. When the company sends you a dividend it has already deducted 10% for taxes – you simply receive the net amount after tax.^* Unfortunately, if you are not a taxpayer you are unable to reclaim the tax paid. If you are a standard rate tax payer (20% tax rate) you will have no further tax to pay on the dividend.

If you are a higher rate taxpayer (40% marginal rate) you will be chargeable for tax on dividends at 32.5%. Because 10% has already been paid you will have to pay the difference, i.e. 22.5%, at a later date (after completing your tax return).

You will receive a voucher with the dividend payment showing the tax paid. Hold on to the voucher because you will be asked to declare dividend income ...