Dividend Tax Changes – April 2025📅 Effective from April 2025
The UK government has announced further reductions to the dividend allowance. From 6 April 2025, the annual tax-free dividend allowance will drop from £500 to £0, meaning that all dividend income will now be subject to tax.
✅ What this means for business owners:
Previously: In 2024/25 you could earn £500 in dividends tax-free.
From 2025/26: Every £1 of dividend income will be taxed.
📊 Dividend tax rates for 2025/26 remain unchanged:
8.75% – Basic Rate taxpayers
33.75% – Higher Rate taxpayers
39.35% – Additional Rate taxpayers
⚠️ Impact:
Directors of small businesses who pay themselves with a mix of salary and dividends will see an increase in tax liability.
Even small dividend payments will now create a tax charge.
More people may need to register for Self Assessment and submit annual returns.
💡 Our advice:
Review your salary vs. dividend strategy.
Consider timing dividend payments before 5 April 2025 to make the most of the remaining allowance.
Speak with us about tax planning options to minimize your liability.
