Reduction in dividend allowance
The dividend tax rates were increased by 1.25% from 6 April 2022 and will remain at 8.75% where the dividends fall within the basic rate band, at 33.75% where the dividends fall within the higher rate band and at 39.35% where the dividends fall within the additional rate band.
Dividends sheltered by the dividend allowance are tax free. The dividend allowance is set at £2,000 for 2022/23. However, it is to fall to £1,000 for 2023/24 and to £500 for 2024/25.