Seriously important changes to taxation of dividends from April 2016
Who is likely to be affected?
Anyone who is liable to income tax on dividend income !!
Mainly affects shareholders of companies who have always drawn dividend income for tax efficiency !
From 6 April 2016 the Dividend Tax Credit will be replaced by a new Dividend Allowance in the form of a 0% tax rate on the first £5,000 of dividend income per year.
UK residents will pay tax on any dividends received over the £5,000 allowance at the following rates:
- 7.5% on dividend income within the basic rate band
- 32.5% on dividend income within the higher rate band
- 38.1% on dividend income within the additional rate band
First tax bills become due under Self Assessment on 31/1/18
Be prepared !!
Dividends received on shares held in an Individual Savings Account (ISA) will continue to be tax free.
If you are worried how it may affect you call Lindsay for an example !