BlogWednesday 15th March 2017
New Dividend Tax
New dividend tax
From 6 April 2016, those who receive more than £5,000 in dividend income will pay more tax. Any income over that amount will be taxed at 7.5% up to a total dividend income of £32,000. For dividend income between £32,001 and £150,000, the tax rate will be 32.5%, rising to 38.1% for dividend income above £150,000.
The notional 10% dividend tax credit will also be abolished.
Act now to reduce your tax for next year
Pay dividends in the current tax year (up to 5 April 2016), as they won’t be subject to the new tax. If you want to avoid slipping in to the higher rate tax bracket, keep your total 2015-16 income under £42,475.
If you have a partner or children
You can transfer shares to a partner or children so that they can benefit from the £5,000 dividend allowance that will be introduced alongside the dividend tax from 6 April. Furthermore, if they have any unused personal allowance, they can be employed by the business and received up to £11,000 tax free.