What is a Self-Assessment Tax Return and how dividend income works?

Self-Assessment Tax Return

Individuals receiving income from dividends, savings, rental property, sole trader business may need to submit a Self-Assessment Tax Return, where income is above the 0% tax allowance for each category.

The tax return for personal income will always cover the period 6 April to 5 April of the next year. This is called the personal tax year. The upcoming deadline of 31 January 2020 for online filing relates to the period 6 April 2018 to 5 April 2019 (Tax Year 2018-19).

An easy way to keep track of the due dates is to remember that the tax return is due 9 months from the month in which the tax period ends. E.g. Tax year ending 5 April 2019 will be due by 31 January 2020, 9 months from the end of April 2019.

Dividend income

The tax rates applicable to dividends are different from other forms of income. From the tax year 2018-19, there is a dividend allowance of £2000. This means that the first £2000 in dividends will be charged at 0%. It is important to remember that this is different from the 'personal allowance' of £11,850 for the tax year 2018-19, which will be deducted before any tax rates are applied to total taxable income.

Dividend income up to £13,650 will be tax-free, from £13,651 to £46,350 basic rate tax of 7.5% will apply, from £46,351 to £161,850 higher rate tax of 32.5% will apply, and from £161,850 onwards additional rate tax of 38.1% will apply.