Questions and Answers
Dividend planning
I’ve heard about these dividend tax changes coming in. I run my own limited company, should I be doing anything about it?
Under the present rules, dividends have been the preferred way for business owners to pay themselves because they are paid net of a notional 10 per cent tax credit. This tax credit effectively meant basic rate taxpayers could enjoy their dividends tax-free.
But in the Summer Budget, it was announced that from April 2016 the tax credit would be replaced by a Dividend Tax Allowance of £5,000. Dividend income over the Allowance will be liable for tax at the basic rate of 7.5 per cent, 32.5 per cent for the higher rate and 38.1 per cent for the additional rate.
Even under the new regime, dividends are still taxed at lower rates than other income and will continue not to attract National Insurance. But many people will see a rise in their tax bill.
The effects of the dividend allowance are far reaching and planning what your company will pay you from April 2016 requires much more care and planning. I would therefore strongly encourage you to seek the advice of a professional, such as your local TaxAssist Accountant.
One of the immediate things to consider, is whether it might be worth declaring some of your dividends in this tax year before the change kicks-in. Although it might meant you have a higher tax bill this year, the tax rates in force are likely to be lower.
Date published 5 Mar 2016
This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.Choose the right accounting firm for you
Running your own business can be challenging so why not let TaxAssist Accountants manage your tax, accounting, bookkeeping and payroll needs? If you are not receiving the service you deserve from your accountant, then perhaps it’s time to make the switch?
Local business focus
We specialise in supporting independent businesses and work with 100,000 clients. Each TaxAssist Accountant runs their own business, and are passionate about supporting you.
Come and meet us
We enjoy talking to business owners and self-employed professionals who are looking to get the most out of their accountant. You can visit us at any of our 409 locations, meet with us online through video call software, or talk to us by telephone.
Switching is simple
Changing accountants is easier than you might think. There are no tax implications and you can switch at any time in the year and our team will guide you through the process for a smooth transition.