Dividends: The old certainties have gone

Dividends have been a good friend to business people, providing a tax-efficient alternative to salary.

But the tax landscape has changed. New liabilities will emerge unless action is taken.

What you need to know

  • From April 2016, up to £5,000 of dividend income is available tax-free
  • Those in receipt of a greater sum must pay tax at a rate of 7.5 per cent (currently nil)
  • It increases, for total income, to 32.5 per cent for the higher rate band and 38.1 per cent for the additional rate (currently 25 per cent and 30.6 per cent respectively)
  • It will leave the majority facing higher bills
  • And don’t forget that the £5,000 – counted as taxable income when determining marginal rates – could push taxpayers into a higher band

What you can do

A redistribution of investments could be the answer, but professional advice should be sought when gauging the benefits of relief-friendly schemes. To find out how our tax service can help you, please contact us.