The Govt will replace the notional dividend tax credit with a £5,000 allowance for all tax payers from April 2016. Those lucky individuals who get more than £5,000 in annual dividend payments will have to pay tax on that income. Tax rates depend upon the three main tax bands. Those who earn up to £31,785 will pay 7.5% on their dividend income above £5,000. Those who earn between £31,786 and £150,000 will pay 32.5% as now, and all those earning above will pay 38.1%, higher than the existing rate. This targets business owners who pay themselves via dividends as well as salaries to reduce their tax bill.
What to do?
1.Ensure you use your tax free annual dividend allowance.
2.Use your ISA.
3.Consider a SIPP.
Should you need help, please do call.