Dividend Allowance Adjustments Explained

By 23rd April 2016Latest News

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.

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