Depending on your circumstances there may a way to utilise your personal allowance to reduce your overall tax burden.
Instead of automatically allocating all of your personal allowance (£11,000 in the 2016/17 tax year) against your salary, you can use it (or some it) to offset dividend income instead.
In the current tax year the first £5,000 of dividend income is taxed at 0% with additional income being taxed at 32.5%. Allocating personal allowance to dividend income would increase income tax exposure at 20% (up to £39,000) but reduce the amount of additional dividend income being taxed at 32.5%.
HMRC software appears to default to using personal allowance only against salary. Publicly available tax calculation software has to mirror HMRC calculations so neither you nor your accountant may be getting the optimal tax savings.
If you want an expert opinion on tax liability this year, why not talk to Lewis Smith & Co.? We offer the full range of tax planning and compliance services for both personal and corporate customers.
Call 01384 235549 or email info@lewissmith.com to arrange a confidential discussion today.
Lewis Smith & Co – Accountants for businesses in Wednesfield
