How many dividends do you get tax-free?

How Much in Dividends Can You Earn Tax-Free?

If you're an investor or own shares through a business, you might be wondering how much in dividends you can earn without paying tax. The good news is, there's an annual Dividend Allowance—a set amount you can receive tax-free, regardless of your other income.

Since the 2016/17 tax year, the UK government has offered this allowance to simplify tax treatment on dividend income. Up until 2023, you could earn up to £2,000 in dividends each year without paying a penny in tax. This applied to both basic and higher-rate taxpayers, making it a valuable perk for small shareholders and investors alike.

However, the figures have changed in recent years. For the 2023-24 tax year, the allowance dropped to £1,000, and it’s set to shrink even further. From April 2024, during the 2024-25 tax year, the Dividend Allowance will be just £500. That means even modest dividend income could now push you into paying tax where it wasn’t an issue before.

These changes mainly affect individuals with investments outside of ISAs or pensions—such as those holding individual stocks or shares in a company they own. If you're approaching or exceeding these thresholds, it's worth reviewing your investment strategy and considering tax-efficient accounts to make the most of your returns.

While £500 may not seem like much, it’s still a buffer before tax kicks in. Just remember: this allowance is separate from your Personal Income Tax Allowance (currently £12,570), so you can earn up to that amount in non-dividend income and still benefit from the dividend exemption—up to the limit.

With allowances shrinking, staying informed is key to keeping more of your investment gains.