Tax Dividend Changes
22nd February 2016
Changes to the taxation of dividends were announced by the Government in the July budget and these will take effect from the 6 April 2016 tax year, a reminder of what these will be are:
- The 10% notional tax credit will no longer exist
- Introduction of a new Dividend Tax Allowance of £5,000 a year
- Dividends within your allowance will still count towards your basic or higher rate bands, and may therefore affect the rate of tax that you pay on dividends you receive in excess of the £5,000 allowance
- New rates of tax on dividends will be:
7.5% for basic rate taxpayers
32.5% for higher rate tax payers
38.1% for additional rate tax payers
What does this mean for you?
We have prepared some calculations which illustrate the additional tax that will arise as a result of the changes and these have been updated since the draft legislation. Check them out here.
In almost all cases you will still be better off taking dividends from your company rather than drawing a salary but the changes will reduce the benefit.