What are dividends and do I pay tax on them?

Dividends are the payments companies make to share some of their profit with their shareholders. Let’s see …

The profit a company makes, after paying its tax, could all be paid out (as dividends) although companies will often want to keep some to reinvest.

Since dividends are paid out from the net profit which has already been taxed, dividends come to you with basic rate tax already paid. If you’re not into the higher tax band then you have no more tax to pay. That’s the same whether the dividends are from your own company or from a major public company.