A dividend is a slice of a company’s profit that is given to the shareholders, which will be yourself if you operate your own limited company.
Dividend income you receive will not be subject to National Insurance contributions, and the first £500 per annum will be tax-free. Dividends above this level which fall within the basic rate tax bracket will be taxed at 8.75%, and if they fall into the higher rate tax bracket they will be taxed at 33.75%. Additional rate taxpayers will pay tax on dividends at 39.35%.