Income Tax Act 2007 section 13A

Income charged at the dividend nil rate

Section 13A provides a £1,000 dividend allowance, charging the first £1,000 of an individual's dividend income at a nil rate of income tax instead of the normal dividend tax rates.

• The first £1,000 of dividend income is taxed at 0% (the dividend nil rate), regardless of which dividend rate band it falls into.
• The £1,000 allowance is applied in order: first against income in the dividend ordinary rate band, then the dividend upper rate band, and finally the dividend additional rate band.
• Any dividend income exceeding £1,000 is taxed at whatever dividend rate would have applied if the nil rate did not exist.
• If total dividend income is £1,000 or less, all of it is charged at the dividend nil rate.