PR HartleyFCA

Chartered Accountant & Registered Auditor


Tax Changes on Dividend Income

added 3 March 2016

At the moment, dividend income is taxed at 0%, 25% or 30.55%, depending on whether your total income (including the dividend itself) puts you into the basic rate, higher rate or top rate bracket. From 6 April the rules change so that, although the first £5,000 of dividend income is tax-free, the tax rates on payments above this level increase by 7.5% across the board and so become 7.5%, 32.5% and 38.1%. There will no longer be a 10% tax credit on dividend payments.

This will primarily affect the owners of private companies, who in the past have typically extracted profits in the form of dividend rather than remuneration in order to save National Insurance Contributions. .

More information on the changes to tax on dividend income can be found on the website.