Following the confusion after the announcement of the changes to dividend taxes HMRC has issued a fact sheet to help provide some guidance to business owners and accountants.
In the summber budget the chancellor announced new rules for the taxation of dividends.
The dividend tax credit will be abolished and new rates of tax will apply to dividends in excess of a Dividend Allowance of £5,000. No tax will be payable on dividends that fall within the Dividend Allowance. The new rules will take effect from April 2016.
After the Personal and Dividend Allowance dividends will be taxed at 7.5% in the basic rate band, 32.5% in the higher rate band (up to £150,000) and 38.1% in the additional rate band (£150,000+).
HMRC have published a factsheet setting out how the new £5,000 Dividend Allowance will work. The factsheet can be found on the GOV.UK website here: http://bit.ly/1YJUYGl
Businesses should consider now whether to pay an early dividend prior to the new tax year to avoid the new rates of tax. Get in touch to find out more.