Dividends paid by UK resident companies to shareholders attract dividend tax according to their income tax bands. Basic rate taxpayers pay 7.5% dividend tax, higher rate 32.5% and additional rate taxpayers 38.1%. This is regardless of whether dividends are taken as cash income or reinvested. The annual dividend allowance lets the first £2,000 of dividends be received tax free. Dividends above this threshold are declared on self assessment returns and taxed at the relevant rate. Tax rates are subject to change for coming tax years.