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Can dividend be taxed as income for individuals?
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hoc
Posts: 586 Forumite

in Cutting tax
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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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 rateDividend basic rate
Dividend higher rateDividend additional/upper rate0 -
There is also the dividend allowance which does not incur income tax, £2k I think.0
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Grumpy_chap said:There is also the dividend allowance which does not incur income tax, £2k I think.0
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Dazed_and_C0nfused said:Grumpy_chap said:There is also the dividend allowance which does not incur income tax, £2k I think.1
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There is no such rule in the UK. Even when dividends are the only income they won't be assessed against income tax.0
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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.3
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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-ratesAnyway 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.0
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Dividend income is never taxed as employment income.1
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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.0
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