How The Changes To Dividend Taxation in 2016 Will Affect You
In the Budget, earlier this year, the Chancellor announced 3 proposed changes to Dividend Taxation to take place next year:
From 6th April 2016, taxpayers who take a substantial proportion of their annual incomes in the form of share dividends are likely to be affected by these changes.
Dividend tax rates
Non-taxpayers 0% 0%
Basic rate taxpayer 0% 7.5%
Higher rate taxpayers 25% 32.5%
Additional rate taxpayers 30.6 % 38.1%
So, How Much Extra Will It Cost You?
As the changes are still under speculation, we are currently awaiting legislation to confirm the exact rates. However, an estimation of the new rates payable on dividend income above the £5,000 allowance is presented below.
|Netdividend||New regime for 2016/17tax on dividend||Old regime –tax on dividend||Extratax|
For example, under the new proposed rules, if you receive a net dividend from your limited company of £50,000 in 2016/17 the tax on the dividend will be £5,670. Under the old regime, the tax would have been only £4,345. Based on these estimations of the new dividend regime, you would be £1,325 worse off as a result of the changes.
Now, What Can You Do In The Meantime?
The new dividend regime does not come into effect until 6th April 2016 and therefore there is scope to maximise your dividend extraction before this date. The amount you can extract will depend on the profits of your company.
If you would like any further information or advice, please email Paul at firstname.lastname@example.org or call 01924 262133.