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Can dividend be taxed as income for individuals?

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hoc
hoc Posts: 586 Forumite
Ninth Anniversary 500 Posts Name Dropper Photogenic
When dividend is the main or even the only source of income for an individual can it then be treated under income tax rules? I recall reading something like this but can't find anything. I've tried a few of the online calculators and don't see any difference tax regime when salary income is entered as 0 but I'm not certain there aren't some special rules these calculators may be omitting. To avoid any confusion I'm talking about dividends distributed from FTSE 100 companies not "dividends" a director may pay himself from his own company.
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  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 17,557 Forumite
    10,000 Posts Fifth Anniversary Name Dropper
    Dividends are always taxed under income tax rules.

    If the Personal Allowance hasn't been used by other income then that could be used followed by these rate bands

    Dividend nil rate
    Dividend basic rate 
    Dividend higher rate
    Dividend additional/upper rate
  • Grumpy_chap
    Grumpy_chap Posts: 18,248 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    There is also the dividend allowance which does not incur income tax, £2k I think.
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 17,557 Forumite
    10,000 Posts Fifth Anniversary Name Dropper
    There is also the dividend allowance which does not incur income tax, £2k I think.
    That's really the dividend nil rate band, £2,000 taxed at 0% 🙂
  • Grumpy_chap
    Grumpy_chap Posts: 18,248 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    There is also the dividend allowance which does not incur income tax, £2k I think.
    That's really the dividend nil rate band, £2,000 taxed at 0% 🙂
    Ok, thanks I missed that was already included in your post
  • expansion
    expansion Posts: 99 Forumite
    Eighth Anniversary 10 Posts
    There is no such rule in the UK. Even when dividends are the only income they won't be assessed against income tax.
  • Jeremy535897
    Jeremy535897 Posts: 10,733 Forumite
    10,000 Posts Fifth Anniversary Photogenic Name Dropper
    expansion said:
    There is no such rule in the UK. Even when dividends are the only income they won't be assessed against income tax.
    This doesn't make sense. The expression "won't be assessed against income tax" has no meaning.
  • hoc
    hoc Posts: 586 Forumite
    Ninth Anniversary 500 Posts Name Dropper Photogenic
    Obviously the context here is about whether dividend income can be classed as employment income. HMRC itself tends to refer to tax on income from employment simply as "Income Tax". See how it is phrased in the table as an example https://www.gov.uk/income-tax-rates

    Anyway it seems there isn't a threshold where dividend income would be taxed as employment income. In the basic rate band there is a significant difference.
  • Jeremy535897
    Jeremy535897 Posts: 10,733 Forumite
    10,000 Posts Fifth Anniversary Photogenic Name Dropper
    Dividend income is never taxed as employment income.
  • prowla
    prowla Posts: 13,984 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 30 May 2022 at 8:28AM
    Dividends are taxed separately to normal employment PAYE Income Tax & National Insurance (NI) and have their own rates for the tax bands.
    This page gives a table of the rates https://www.theaccountancy.co.uk/limited-company/dividends/paying-tax-on-dividends-in-2022-23-56115.html; from that you'll see that the above-mentioned £2k is tax-free (just as is the first £12k of  normal earnings).
    Dividends are not subject to NI. (CORRECTION: Dividends are subject to the new 1.25% NI levy!)
    Typically your employer handles PAYE employment Income Tax and NI, but you have to do a tax return to declare your dividends.
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