Dividend Tax Rates 2025: What Limited Company Directors Should Know

If you run a limited company, how you take income is one of the biggest drivers of your financial efficiency. Dividends remain a key part of that strategy—but the rules around them have shifted in recent years. Understanding today’s dividend tax rates can help you plan smarter, stay compliant, and make the most of your hard-earned profits.

What is a dividend?

A dividend is simply a share of your company’s profits paid to its shareholders. Most directors use a mix of salary and dividends to balance personal income, tax efficiency, and company performance. The right structure can make a real difference to what you take home.

Dividend tax rates for 2025

Here’s what applies once you go over the current £1,000 tax-free dividend allowance (previously £2,000):

• Basic rate: 8.75%
• Higher rate: 33.75%
• Additional rate: 39.35%

You don’t pay dividend tax on shares held in certain investments, such as:

• Stocks and Shares ISAs
• Junior ISAs
• Lifetime ISAs
• Self-Invested Pension Plans (SIPPs)

Balancing salary, dividends and NI

With income tax thresholds and National Insurance limits remaining tight, finding the right mix of salary and dividends has never been more important. Too much salary can push up NI costs, while taking only dividends may affect pension contributions and lending applications.

Our team helps you navigate these decisions with clarity so you can protect your income and plan ahead with confidence.

‍