A huge change was announced in relation to the taxation of dividends and this will be of significant interest to any investor or owner of a limited company.
- From April 2016, the current 10% dividend tax credit will be abolished. It will be replaced with a new £5,000 a year dividend tax allowance.
- The new rates of tax on dividend income above the allowance will be:7.5% for basic rate taxpayers32.5% for higher rate taxpayers38.1% for additional rate taxpayers.
GENERAL IMPACT
- The Government's stated intention is for these reforms to reduce the incentive to incorporate and remunerate through dividends. The tapered annual allowance for those with incomes including pension contributions of over £150,000 will also apply from April 2016. There will be considerably less scope to use dividends and employer pension contributions to maximise tax efficient director's remuneration in future. Companies with undistributed profits should consider taking advantage of the last chance to make the most of these strategies before the end of the current tax year.
- Higher rate and additional rate taxpayers with modest dividend income from share/OEIC portfolios will welcome the change, with a potential saving of up to £1,250 a year for a higher rate tax payer, compared to now.
No comments:
Post a Comment