Dividend Tax Calculator

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A simple way to calculate tax on dividends

Use this dividend tax calculator to help with tax planning for the 2016-2017 tax year.

Dividend tax rules changed on 6 April 2016. This dividend tax calculator, provided by AJN Accountants, factors in the new method and will help you to calculate the tax and NIC on your salary and dividends combined, as well as detail your take home pay.

Simply complete your gross salary and desired or planned dividends and click to calculate.

Dividend tax rate

The dividend tax rate has recently changed to exclude the dividend tax credit. This means that even basic rate tax payers will be subject to paying some tax on their dividends.

The table below presents the dividend tax rate for the current and previous tax year.

Per year

Dividend tax free allowance

Dividend tax – Basic

Dividend tax – Higher

Dividend tax – Top

15/16

£0

0.0%

25.0%

30.6%

16/17

£5000

7.5%

32.5%

38.1%

The new £5,000 tax free dividend allowance, that was introduced on 6 April 2016, means that some dividends do remain tax-free. However, almost all people will end up paying more tax on dividends in 16-17 than in 15-16.

Taxation of dividends

Most contractors and freelancers, that trade using a limited company, will find that dividends are the most tax-efficient way to draw contracting income out of the company. This coupled with a small salary, just below the tax-free personal allowance and National Insurance (NIC’s) threshold, is typically the best mix.

Particularly, for those wanting to draw dividends in excess of the higher-rate threshold, further tax planning is advantageous to keep tax to a minimum.

Keeping your total taxable income within the basic rate tax band can be achieved through various tax planning strategies, such as pension planning, salary sacrifice schemes, claiming the maximum business expenditure against your contracting income, plus more.

Careful timing of when you draw dividends can also have a positive effect on your overall tax position. Bespoke dividend tax planning requires expert, specialist advice.

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