New Dividend Tax Rules for 2016/17
Have you taken advice yet on how the new 2016/17 changes to the way dividends are taxed affects you?
Have you taken advice yet on how the new 2016/17 changes to the way dividends are taxed affect you?
Are you paying yourself a minimal salary and maximising your dividends to take advantage of the lower rates? The changes could affect you.
HMRC are changing the way in which dividends are taxed from April 2016. Until now, dividends involve a complicated add back of corporation tax already paid on those earnings and a tax credit back of later on equal to the same value, leaving many people confused as to how tax is actually calculated. The new system will do away with this method and simply tax you at a percentage based on different thresholds. HMRC say the new rules simplify the calculation, but with these thresholds and new percentage charges, how does this affect you?
Let’s look at an example with the old and new method side by side;
Target Income of £70,000.
Tax at 20%
Tax at 40%
Dividend Tax at 7.5%
Dividend Tax at 10%
Dividend Tax at 32.5%
Less 10% notional credit
Total Tax Liability
Without making any changes, based on these numbers there is an additional £2,952 of tax payable.
If you need some advice on how to best minimise this impact on you, get in touch and let’s see where we can help.