Update on dividends next tax year – what do you need to know…

August 20, 2015

It was a big surprise that George Osborne proposed rule changes to the way that dividends are taxed in the budget a few weeks ago.

HMRC haven’t published full details yet but here is what we know so far.

Currently you can take out £28,606 dividends tax free (on top of your £10,600 salary). From next year, the first £32,000 will be taxed at 7.5%.

Currently you receive a tax charge of 25% after the first £28,606, next year after the first £32,000 you will receive a tax charge of 32.5%.

So despite what you may thing, our friend George Osborne has hiked up the taxes for owners of limited companies!

There’s two big implications. Firstly, I suspect that we will be urging clients to take out more from their companies this tax year – the tax year ended 5 April 2016. Secondly, personal tax planning will become all important to avoid the dreaded 32.5% (alongside the 20% corporation tax, this is looking like 52.5% tax rate!).

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