An excellent piece on the changes to dividend rates and how they might affect you and your business interests. Food for thought for owners and advisors alike over the next 8-9 months
At present dividends are not effectively charged to tax to the extent that they fall within the recipient’s basic rate band. Dividends received by someone paying the 40% rate of tax are taxed at 25%: and for the highest earners, whose income falls within the 45% band, the corresponding dividend rate is 30.55%. From 6 April all of these rates will be increased by 7.5% so that for a basic rate taxpayer dividends will be charged at 7.5%; for a 40% payer the rate will be 32.5% and for a top-rate taxpayer, 38.1%. However, in every case the first £5,000 of dividend income will be tax-free.