How Do You Report Dividends on Self-Assessment?

How to report dividends on self-assessment? Dividends are a periodic income source compared to other income sources. There are always switches in the tax charged on dividends in the UK. If you are investing in stocks and shares and are eligible for self-assessment for filing a tax return, then this article gives you an idea of how to report dividends on self-assessment.

 

How to Report Dividends on Self-Assessment?

Dividends are the payments made by companies at regular intervals to their shareholders. A dividend is part of the company’s profit that is divided among its shareholders. The dividend amount depends on the company’s performance and the number of shares owned by a shareholder.

The UK government has imposed a tax on dividends received by shareholders. HMRC has set certain limits below which no tax is imposed on shareholders; this is known as a tax-free dividend allowance. The tax-free dividend allowance was introduced in April 2016 for all UK residents. This allowance replaced the previously practised dividend tax credit system. Recent changes to tax-free dividends have lowered the limit, meaning more people will have to pay tax on their dividend amounts.

How to Calculate Tax on Dividends?

To report dividends in self-assessment, tax must be calculated. The following three steps are followed to calculate tax on dividends.

• Add your dividend profit to all your other income sources, such as your monthly salary or rental income.
• Calculate your tax band by adding all your income, that is, rental income, monthly salary, and income from other part-time or online jobs.
• You are liable to pay tax based on your highest tax band.

How Dividends are Taxed?

The HMRC has set criteria on dividends regarding tax imposition. If a shareholder is earning dividend income that falls under his personal allowance amount, then he is not liable to pay any tax on dividends. However, there is a dividend tax allowance set each year by the HMRC; shareholders only pay tax on the amount above the dividend allowance. Tax is paid on dividends from shares in an ISA. There are four different tax bands and different dividend tax brackets.

• Personal Allowance

This tax band ranges from an income of £0 to £12,570. The income tax bracket on this band is 0%, and the dividend tax bracket is also 0%.

• Basic rate

This tax band ranges from an income of £12,571 to £50,270. The income tax bracket on this band is 20%, and the dividend tax bracket is 8.75%.

• Higher rate

This tax band ranges from an income of £50,271 to £125,140. The income tax bracket on this band is 40%, and the dividend tax bracket is 33.75%.

• Additional rate

This tax band ranges from an income of over £125,140. The income tax bracket on this band is 45%, and the dividend tax bracket is 39.35%.

According to the above tax bands, the dividend tax rates are less than income tax rates, which makes dividends a more preferred form of income. The owners of small companies can take dividend profits from their company shares; this imposes less tax liability on them compared to other sources of income.

Tax on Dividends from Investments

In the United Kingdom, there is zero tax on dividends received on shares in stocks or shares ISA. The shareholders pay tax on the other shares they own. This tax is assessed by the broker the shareholder has hired or the trading platform they are using.

If a shareholder has dividend payments above their unused personal allowance and dividend allowance, they should inform HM Revenue and Customs (HMRC).

How Do I Pay Dividend Tax?

The UK government has set different criteria for taxation regarding dividends. The salary tax is paid by the individual as soon as they receive the salary. However, in the case of dividends, there are certain tax bands. If the dividends fall under the dividend allowance the £500, no tax needs to be paid. However, if the dividend profit is above £500 but below £10,000 in the current tax year, you should inform the HMRC. The HMRC will give you the option of either adjusting the tax code to pay the dividend tax or paying the imposed tax amount by the self-assessment process. If your dividend tax is above £10,000, then you can only pay the employed tax by the self-assessment tax return process to the HMRC.

The self-assessment tax return must be filed for the tax year before the deadline, i.e., 31st October. For example, you must complete your online tax return for the 2025-2026 tax year by 31st January 2027. If the deadline is passed, you are fine by the HMRC.

Registering for Self-Assessment

If you are eligible for a tax return through self-assessment, you must register for self-assessment by October 5. All the guidelines are available on the UK government website. If you are new to the self-assessment process, then you will need to keep records of all the dividends you received from the company you invested in for completing the tax return through self-assessment.

The registration tool for self-assessment is available on the UK website, but before that, you need to work out if you are eligible for self-assessment. If you registered for self-assessment last year but didn’t send the tax return, then you must register again to file the tax return through self-assessment. There are different forms for self-assessment tax returns, which are available on the UK government website. You must fill out and file a self-assessment tax return (SA100) if you have untaxed income, which includes income from savings, investments, and dividends. SA 100 is the form used to report dividends in self-assessment.

 

Conclusion

Dividends are the best side hustle. They are also taxed in the UK according to the gains they make in a person’s yearly income. The individual who is eligible for self-assessment should fill out the SA100 form to report dividends in the self-assessment process. There are different tax percentages according to the income tax rate of the individual; in general, dividends are taxed less than other income sources. All the guidelines and eligibility criteria for self-assessment are available on the UK government website.

Disclaimer: All the information provided in this article on how to report dividends on self-assessment, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.