Interactive Investor

Are SIPP dividends tax-free?


Are SIPP dividends tax-free?

SIPPs are a tax-efficient way to save for your future. As well as tax-relief on contributions and a tax-free lump sum from age 55 (57 from 2028), you also benefit from tax-free growth on your SIPP investments

SIPP dividends and tax

Dividends paid on investments held within a SIPP are tax-free. 

There is no dividend tax or capital gains tax to pay.  

As growth on your investments is tax-free within a SIPP, your money can grow faster than in an investment that is subject to tax. 

What are the 2024/2025 dividend tax rates?

Investments are subject to dividend tax unless they're held in tax wrappers like a SIPP or a Stocks and Shares ISA.

Everyone has a dividend allowance, which is currently £500. This used to be £1,000 last tax year. In addition, you do not pay tax on any dividend income that falls within your income tax personal allowance. 

Any dividends received in excess of the dividend allowance, plus any unused income tax personal allowance, will be taxed. The rate of tax is dependent on your income tax band. 

Income tax band

Tax rate on dividends over the allowance

Basic rate


Higher rate


Additional rate


Using SIPPs to shelter your dividends

Sheltering investments that pay dividends in tax wrappers such as a SIPP or an ISA has become more important over the last few years.

The dividend allowance has been reduced steadily since it was introduced in April 2016 at £5,000. It was cut to £2,000 in 2018; £1,000 in 2023; and it has now been reduced to £500 for the 2024 tax year.

The dividend tax rate was also increased by 1.25 percentage points in April 2022, adding an extra £1.25 tax charge for every £100 of dividends received above the allowance.

Did you know

This tax charge applies on all investments that produce dividends, even where they are reinvested rather than paid to you. 

How can Pension Wise help?

If you have a defined contribution pension scheme and are 50 or over, then you can access free, impartial guidance on your pension options by booking a face to face or telephone appointment with Pension Wise, a service from MoneyHelper

If you are under 50, you can still access free, impartial help and information about your pensions from MoneyHelper

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Please remember, SIPPs are aimed at people happy to make their own investment decisions. Investment value can go up or down and you could get back less than you invest. You can normally only access the money from age 55 (57 from 2028). We recommend seeking advice from a suitably qualified financial advisor before making any decisions. Pension and tax rules depend on your circumstances and may change in future.