A Major Change to Dividend Taxation
HMRC has now clarified the structure and tax rates of its new Dividend Allowance.
From April 6th 2016 the new tax regime will replace the Dividend Tax Credit and many limited company owners will see a significant tax increase.
The changes are designed to reduce “tax motivated incorporation” where small companies pay a salary within the tax free band and then use dividends to minimise NI payments.
Under the new rules there is a £5,000 tax free Dividend Allowance but 3 new bands will apply to dividend income above that amount.
- 7.5% (basic rate)
- 32.5% (higher rate)
- 38.1% (additional rate)
Unfortunately the new Dividend Allowance also applies to dividends from investments (unless they are protected by an ISA).
If you are unsure of the impact on the changes on your business talk to Lewis Smith & Co. today. We offer a free, no-obligation initial consultation.
Call 01384 235549 or email email@example.com to book an appointment.
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