Dividend Tax Planning
A new Dividend Tax is coming in from April 2016 so now is the time to effectively plan whether maximising proposed dividends in March could save you money.
Tax Credits are being abolished and a new effective rate of 7.5% will be payable on all dividends over £5,000. Currently basic rate tax payers pay zero effective rate tax on dividends.
Higher rate tax payers will see the effective rate rise from 25% to 32.5% and additional rate tax payers from 30.6% to 38.1%.
This means in most cases you will pay less tax if a dividend is proposed in March rather than after.
Cloud Accountant are happy to calculate your available profit and illustrate the potential tax savings from paying an additional or higher dividend in March.
One thing to bear in mind is that where dividends are paid in the current tax year then any additional tax due will be payable on the 31st January 2017 rather than 31st January 2018 (if the dividends were voted in the next tax year). However if you are a basic rate tax payer then there may be no additional tax due.
Cloud Accountants can be contacted on 0808 281 0303 or email: firstname.lastname@example.org