dividend tax rates 2021-22

A Guide to UK Dividend Tax Rates in 2021/22

If you are associated with a business as an owner in the UK, you must know about the dividend tax rates 2021-22 that can affect the money that you intend to withdraw for yourself from your company. In order to ensure that you make the most of your take-home income, you must be completely aware of the dividend tax rates. This article is primarily everything that you need to know about the 2021-22 process of dividend taxing in the UK.

Before we delve into further discussion, we will have a look at the focused points of discussion in this article. This includes the following:

  • What Is Dividend Allowance?
  • Explanation of Dividend Tax Rates 2021-22
  • Taking Dividends – The Procedure
  • The Bottom Line


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What Is Dividend Allowance?

Further in this article, we will have a discussion over different rates related to dividends and how they might affect you. However, before that, you must know that every person is assigned with dividend allowance at the beginning of a tax year.

All the taxpayers have dividend allowance available and it doesn’t matter what is the tax rate they are paying at that moment. The recipient may fall into any tax category, dividend allowance amount will remain the same. Many of you must be looking for an explanation of what exactly is the dividend allowance? It is actually an amount that any individual is allowed to earn before he is taxed that we call dividend allowance which is now £2,000 (2021-22).


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Explanation of Dividend Tax Rate:

In case you are making your earning just above the dividend allowance, your tax will be dependent on the following tax rates:

The good news is that the tax rates are a little changed than they were in the previous tax year. This includes the following:

  • Higher rate: 40%
  • Additional Rate:  45%
  • Basic rate:  20%

In case you are thinking about whether these above-mentioned rates are applied in reality or not? It is mostly depending on the personal income allowance. In order to understand what rates apply to you, here is a discussion of the income tax rates.

  • If your income is below £12,570, you will not pay any tax.
  • If your income is between £12,572 and £50,270, you will pay the basic tax bracket which is 20%.
  • For people with an income from £50,271 to £150,000, the higher tax rate bracket is applied which is 40%.
  • Lastly, if your income is more than £150,000, the additional tax rate for you will be 45%.


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Taking Dividends – The Procedure:

It is mentioned above as well that taking the dividends is more tax-efficient in comparison to taking the salary only. In case you intend to take the dividends, or even if you plan to issue them for the directors or shareholders, there is a requirement of meeting with the directors. This can be done at any time during the financial year. The vouchers of the dividends must be kept safe for a record:

  • Company Name
  • Payment date
  • Recipients names
  • Amount of the dividend

The way your find the most tax-efficient can be decided by your own will.


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The Bottom Line:

Now that you have developed a better understanding of the dividend tax rates 2021-22, we can sum up the discussion by saying that the process of tax treatment and dividends is a little complex which might need professional help in order to ensure seamless working and making the right decision.

We hope this article helped to provide fair information to develop a better understanding.


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Disclaimer: This article intends to provide general information based on the dividend tax rates 2021-22 and the relevant details.

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