How are individuals taxed on distributions received from companies?
How are individuals taxed on distributions received from companies?

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • How are individuals taxed on distributions received from companies?
  • The charge to tax
  • Distributions paid by UK resident companies
  • Distributions paid by non-UK resident companies
  • Non-UK tax
  • Rates of tax
  • Dividend allowance
  • Practical application
  • Notification

This Practice Note explains the rules that apply to distributions made to UK resident and domiciled individuals on or after 6 April 2016.

The way in which individuals are taxed on distributions was substantially changed in Finance Act 2016 (FA 2016). Prior to 6 April 2016, dividends were received with a dividend tax credit of 1/9 and then taxed at 10%, 32.5% and 37.5% respectively. For more information, see Practice Notes: How are individuals taxed on distributions received from UK resident companies prior to 6 April 2016? [Archived] and How are individuals taxed on distributions received from non-UK resident companies prior to 6 April 2016? [Archived]

Additional rules apply to:

  1. individuals who receive distributions in their capacity as trustees (for more, see Practice Note: Taxation of trusts—investment income—Dividends and company distributions)

  2. individuals who are taxed on the remittance basis (for more, see Practice Note: The meaning of remittance and eligibility for the remittance basis)

  3. individuals who receive distributions in their capacity as dealers in shares or securities

  4. open ended investment company dividends and authorised unit trust dividends (for which see Practice Note: AIFs—taxation of individual participants)

  5. real estate investment trust dividends (for which, see Practice Note: UK REITs—taxation of the REIT and shareholders), and

  6. shares awarded to an individual under an approved share incentive plan (for which, see Practice Note: What is a