Self assessment for dividend income in the UK

What is dividend income?

Dividend income is the money you receive from your investments in shares of companies. When a company makes a profit, it may choose to distribute some of that profit to its shareholders in the form of dividends. If you own shares in a UK company (or a foreign company that is registered on a UK exchange), you are likely receiving dividends, and these must be declared to HMRC via self-assessment if they exceed a certain threshold.

When do you need to file a self assessment for dividend income?

In the UK, you're required to submit a self-assessment tax return if your dividend income exceeds the annual dividend allowance, which is set by the government each tax year. For the 2023/24 tax year, the dividend allowance is £1,000.

If your dividend income is above this threshold, you'll need to declare it on your tax return and may be liable to pay tax. Here’s how the tax rates break down:

• Basic rate (7.5%): For income up to £37,700.

• Higher rate (32.5%): For income between £37,701 and £150,000.

• Additional rate (38.1%): For income above £150,000.

These rates apply to dividend income that exceeds your Personal Allowance (£12,570 for most people) plus the Dividend Allowance.

Step-by-step guide to filing your self assessment for dividend income

1. Gather your financial information

Before you begin the self-assessment process, gather all relevant financial documents, including:

• Dividend vouchers from each company you've invested in.

• Any relevant bank statements or investment reports.

This will ensure you have all the information you need to accurately report your income.

2. Register for self assessment

If you haven't registered for self-assessment before, you'll need to do this first. You can register online with HMRC, but be aware that it can take up to 10 working days to receive your Unique Taxpayer Reference (UTR) number, which you'll need to file your return.

3. Complete the self assessment tax return

When filling out your self-assessment, you'll need to report your dividend income under the "UK interest and dividends" section of the return. Be sure to enter the total amount of dividend income you've received, including those under the allowance threshold.

HMRC will automatically calculate the amount of tax you owe based on the information you provide.

4. Submit your tax return

The deadline for submitting your online self-assessment tax return is 31st January following the end of the tax year. For example, for the tax year 2023/24, the deadline is 31st January 2025. If you're submitting a paper return, the deadline is earlier, on 31st October.

Missing the deadline can result in penalties, so it’s crucial to file on time.

5. Pay any tax owed

Once your self-assessment is submitted, HMRC will inform you of any tax due. The payment deadline is also 31st January. You can pay online, by bank transfer, or via direct debit.

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Filing a self-assessment for dividend income doesn’t have to be a stressful experience. By understanding the key steps and deadlines, you can ensure that your tax return is submitted on time and that you’re paying the correct amount of tax.

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