Following our theme of the seven deadly sins of tax planning, or in other words seven key things to make sure that you avoid prior to the 5 April 2019, this time we consider… failing to use the tax free dividends and savings allowances.
At present each individual has a tax-free dividend allowance of £2,000 per tax year. Over and above this the tax rates on dividends depend on the level of your other income, 7.5% for a basic rate tax payer, 32.5% for higher rate and 38.1% for additional rate taxpayers.
So if you are a business owner, and you have enough distributable reserves, you should be looking to pay a dividend up to £2,000 to make use of the allowance. If the cash is not available to pay the dividend it can be left in your loan account and drawn when funds permit.
For more information, please contact Lesley Sutton on 01484 550037 or email firstname.lastname@example.org.