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Osborne's new tax on dividends - another kick in the teeth for business

Following on from my blog post 2016 - the perfect storm for small business, I thought this was a good time to mention Osborne's dividend tax.

The new rules don't start until 6 April 2016 but there may be tax saving opportunities during the next few weeks so it's important to understand the rules sooner rather than later.

In very simple terms, the first £5,000 of dividend income in each tax year will be tax-free. Sums above that will be taxed at 7.5 per cent for basic-rate taxpayers, 32.5 per cent for higher-rate taxpayers and 38.1 per cent for additional-rate taxpayers. No tax will be deducted at source; taxpayers must use self-assessment to pay any tax due.
Under the current rules basic rate taxpayers pay no tax on dividends, higher rate ones pay 25% and additional rate taxpayers 30.6%.

So everyone will be paying another 7.5% tax on their dividends.

Or to put it another way, if you take a dividend each year from your company of £15,000 you're going to have to pay an extra £1,125 tax each year with effect from 6 April 2016. Thanks George.

As I said previously, there are tax planning opportunities but time is running out. Please contact us to discuss them.