What is a SCRIP dividend?

When companies issue SCRIP dividends, it means they are giving investors the option to receive additional shares instead of a cash dividend.

SCRIP dividends are exempt from stamp duty and dealing charges and means the company can keep cash within the business. Investors may be able to receive a tax benefit, if the capital gain by selling the SCRIP dividend in the market falls below the annual tax-free allowance for capital gains.

The SCRIP dividends usually relate to newly created shares rather than pre-existing ones. They are taxed in the same way as cash dividends and should be stated when completing your Self Assessment tax return.