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Dividend Tax Rates

The new regime for the taxation of dividends comes into effect from 6 April 2016.  The changes are:

  • The tax credit of 10% has been abolished;
  • A new 0% rate on the first £5,000 of dividend income has been introduced as a ‘dividend allowance’;
  • New dividend tax rates of 7.5%, 32.5% and 38.1% will apply for basic rate, higher rate and additional rate taxpayers respectively for sums over and above the 0% allowance.

Business owners looking at profit extraction may want to consider a bit of planning in this short remaining window prior to 5 April 2016 and pay a dividend before that date if cash flow and reserves allow.  Thought should also be given to the consequential accelerated tax payment date though and the appropriate minutes and cash movements should be recorded to demonstrate clearly a pre 6 April date of payment.



Date: 22nd March, 2016
Author: Cathy Corns


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