New Dividend Rules

From 6th April 2016 Directors and shareholders receiving dividends will now be taxed differently than before. The first £5,000 in dividends received will be tax free but after that there will be tax implications.

 

If a Director / Shareholder receives dividends more than £5,000 and their total taxable income is no more than £32,000 they will be taxed at 7½%, anything above this up to the additional rate band of £150,000 will be taxed at 32% and above the additional rate band of £150,000 will be taxed at 38.1%.

 

To give you an idea of how this works; if a Director / Shareholder received a salary of £10,500 plus dividends of £25,000 in 2015/16 there would be no tax payable however, in the 2016/17 tax year they would pay 7½% tax on £19,500 amounting to £1,462.50 worked out as follows: –

 

Salary                                              £10,500

Dividends                                       £25,000

Less Personal Allowance             (£11,000)

Less first £5,000 Dividend        (£5,000)

Dividend Taxable Amount           £19,500

If you think this may affect you and would like more advice then please get in touch.