When you take dividends has never been more critical due to changes in the Summer Budget 2015, so if you have distributable reserves you might want to take more dividends this tax year, try the Dividend Calculator above to see how much difference it could make.
Dividend tax rates before April 2016
| Tax band | Effective dividend tax rate |
|---|---|
| Basic rate (20%) (and non-taxpayers) | 0% |
| Higher rate (40%) | 25% |
| Additional rate (45%) | 30.56% |
This will change from April 2016, see the table below
Dividend tax rates after April 2016
| Tax band | Effective dividend tax rate |
|---|---|
| Tax Free £5,000 | 0% |
| Basic Rate Tax Payers (20%) | 7.5% |
| Higher Rate Tax Payers (40%) | 32.5% |
| Â Additional Rate Tax Payers (45%) | Â 38.1% |
The new rules are easier to follow, the 10% tax credit in the current rules is hard for most people to follow.
There is a Dividend Allowance factsheet which helps to explain how dividend tax will be calculated.
But be warned!
While these rates remain below the main rates of income tax, those who receive significant dividend income – for example due to very large shareholdings (typically more than £140,000) or as a result of receiving significant dividends through a closed company – will pay more.
So far we don’t know how much more!
steve@bicknells.net
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