Changes in dividend rules effective from 6th April 2016

You may be aware there are some changes in the calculation of tax on dividends announced in the last budget.  

From April dividends will be taxed in a new way. Gone will be the 10% tax credit and the basic rate banding. Which effectively meant you didn’t pay any tax on dividends if your total earnings didn’t exceed c43K.

Under the new rules the first £5,000 of divided income won’t be taxed. Then the next £32,000 is taxed at 7.5%. But only after other income has been taxed into consideration.

 

We would suggest you review the amount of dividends taken so far in this tax year together with other income. If its less than £43,000 (plus any additional pension relief for higher rate tax payers) there may be an opportunity to save some tax if the dividends were paid in the tax year 2016/17.