What is a dividend? To put it simply, a dividend is money that a limited company pays to its shareholders. Only limited companies can pay dividends; partnerships and sole traders cannot. Many limited companies pay regular dividends to shareholders on a quarterly basis, and if you have a considerable number of shares, this can certainly add up. Income from such investment is taxable and there are three different rates. Today, SimpleTax will explain the different income tax rates on UK dividends. Different dividend tax rates from 6 April 2016 The notional 10% tax credit on dividends is abolished A £5000 tax free dividend allowance is introduced (this reduces to £2000 from 2018/19) Dividends above this are taxed at  BASIC RATE 7.5% HIGHER RATE 32.5% ADDITIONAL RATE 38.1% Dividends received by Pensions and ISA's are unaffected Dividend Income is treated as the top band of income Individuals who are basic rate payers who receive dividends of more than £5001, will have to complete a Self Assessment from 6 April 2016.    If you receive dividend income, whether you pay tax or not, you must declare dividend income each year via self-assessment. But don’t worry, SimpleTax is here to make things extra easy. Take the hassle-free route to filing your taxes; Go SimpleTax      Other Keywords: dividend; interest; net; divi; shares