• Sun. Mar 3rd, 2024

North East Connected

Hopping Across The North East From Hub To Hub

Action needed on dividend tax, accountants warn


Mar 24, 2016 #Accountants, #tax

Screen Shot 2016-03-24 at 09.58.46Tax experts at a Tees Valley based firm of chartered accountants and business advisors are advising business owners to act now, if they haven’t already, to avoid being caught out by dividend tax changes.

George Hardey, Head of Tax at Waltons Clark Whitehill, has issued a warning to company directors and other business owners who are paid dividends, stating that they could lose thousands of pounds per year in additional tax, if they don’t make preparations before April 6th.

New rules, which come into force on April 6th 2016 make the first £5,000 of income from dividends tax free, and above that amount varying rates are levied on people in different tax brackets. On dividends above £5,000 basic rate taxpayers will pay 7.5%, higher rate payers will pay 32.5%, and additional rate payers will pay 38.1%. This is a 7.5% increase in tax at all rates.

George Hardey said: “Business owners who pay themselves using dividends have until April to make the most of the current arrangements before they are required to pay an additional 7.5% tax.

‘‘Bringing forward dividends can give a tax saving as opposed to taking these after 6 April, providing the dividends would be taxed in the same tax bracket.  Of course the company would require sufficient distributable profits at the current time to pay these’’

“The changes aren’t bad news for everyone, with small investors set to benefit from the new £5,000. Income from dividends can still count towards an individual’s personal allowance if they earn less than this allowance from other sources of income

“For most people the limit is £11,000 next year, so if someone was to take home a salary of £6,000, their remaining personal allowance could allow them to be paid an additional £5,000 in dividends tax free, effectively allowing them to be paid £10,000 in dividends before paying tax on them.

“If you think you will lose out next year, the time to act and protect your earnings is now.”




By admin