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The Forum of Private Business

Contact: Peter Wormley
Address: 21 The Crossways, Chandlers Ford, Eastleigh, Hampshire, SO53 3BU
T: 02380972363 | M: 07989150972
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The Forum of Private Business is the 2nd largest small business lobby and support group in the UK. For an annual fee of as little as £175pa Members of…

Listed in: Business Services

Individuals and businesses who pay small salaries followed by much larger dividend payments should now be aware of the changes which took effect from 6th April this year.

The taxation on dividends, as announced in the Summer Budget 2015, means that the previous 10% tax credit on dividends has been abolished and replaced with a £5,000 tax free dividend allowance. However, any dividend extracted that exceeds £5,000 will be subject to tax depending on your tax rate – 0% if still within your tax free allowance, 7.5% for basic rate, 32.5% for higher rate and 38.1% for additional rate payers. Those with any dividend received by pensions or ISAs should not be affected.

How will the changes impact me?

Essentially, when this is put into practice it will mean that basic rate taxpayers receiving dividends in excess of £5,000 will inevitably be paying more tax. This is because previously they will not be paying any tax on dividends, whereas with the new tax system they will effectively be paying tax on any dividend extracted that exceeds £5,000.

Those individuals who are basic rate payers and who previously received dividends in excess of £5,001 and with a fantastic bookkeeper (no plug there!) should have declared their available dividends prior to 6 April in order to manage them effectively.

If you are concerned about how the new taxation to dividends is affecting you so far, do get in touch I’d be delighted to have a chat:

Dividends…how will the changes impact you?