Tag Archives: dividend allowance

7.5% INCREASE IN INCOME TAX ON DIVIDENDS TO PROCEED

The legislation to introduce the new system of dividend taxation announced in the Summer Budget has now been included in the draft Finance Bill. Although individuals will be able to receive £5,000 of dividend income tax free each year from 2016/17, once that has been used up there will be a 7.5% increase in the rate of tax on dividends so you may wish to consider increasing your dividend payments before 6 April 2016.

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CHANGES TO TAXATION OF DIVIDENDS

The Chancellor has announced that from 6 April 2016 there will no longer be a notional tax credit associated with dividends received and the following rates will apply after a £5,000 tax free dividend allowance:

Basic rate taxpayers        – 7 ½%

Higher rate taxpayers       – 32 ½%

Additional rate taxpayers  – 38.1%

 

This will mean that from 2016/17 individuals will be able to receive up to £17,000 tax free:

Personal allowance          £11,000

Tax free interest           £1,000

Tax free dividends          £5,000

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