As most of you will be aware, major changes to the taxation of dividends apply from 6 April 2016.
The current tax credit system is being withdrawn and all tax rates are increasing by 7.5%. Currently a basic rate taxpayer pays no income tax on dividends, from 6 April they will pay 7.5%. However the first £5,000 of dividends received will be tax exempt.
Overall the changes will increase the tax payable by most owner managers who received remuneration in the form of dividends. For instance, the tax payable on a cash dividend of £100,000 will increase by approximately £3,800.
As a result now is the time to review your remuneration planning both for 2015/16 and also future years.
In advance of the changes the Government are also looking at bolstering various tax avoidance provisions designed to prevent income being paid out to shareholders in capital from, such that
entrepreneurs relief at 10% will apply. More on this in our next issue.
For more details contact Lesley Sutton on 01484 550037 or email email@example.com.