The rate of income tax on dividends has changed. From April 2016, 10% tax credits on dividends will be abolished as the Government introduces new measures that affect all who receive dividends.
- From April 2016, notional 10% tax credit on dividends will be abolished.
- A £5,000 tax free dividend allowance will be introduced.
- Dividends above this level will be taxed at 7.5% (basic rate), 32.5% (higher rate), and 38.1% (additional rate)
- Dividends received by pensions and ISAs will be unaffected
- Dividend income will be treated as the top band of income.
- Individuals who are basic rate payers who receive dividends of more than £5,001 will need to complete self assessment returns from 6 April 2016.
These changes affect anyone in receipt of dividends. While the first £5,000 of any dividend is tax free, in 2016/17:
- Upper rate taxpayers will pay tax at 38.1% (previously 30.55% in 2015/16)
- Higher rate taxpayers will pay tax at 32.5% (previously 25% in 2015/16)
- Basic rate taxpayers will pay tax at 7.5 (previously 0% in 2015/16)
Our team have all the information you need to understand how these changes might affect you. Please call on 01942 816512 to discuss your dividend allowance in more detail.