From 6th April 2016 the 10% Dividend Tax Credit will be abolished and there will be a new Dividend Tax Allowance of £5,000 per year in its place.
That’s where the good news ends!
A new Dividend Tax will also be levied on Dividend Income above the allowance at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. The effect of this is to increase the rate of tax on Dividends above the allowance by 7.5%. This means that for someone receiving £30,000 of Dividends per year there will be an additional tax liability of £1,875 – Ouch!
Never before has it been such a good idea to transfer shares in your company to your spouse! This could save £375 in tax (per year) by utilising their Dividend Tax Allowance as well as your own. If this is something that interests you then please get in touch and I’ll be happy to assist.
Paul
