Dividend changes for business owners

Jul 14, 2016

As the end of the financial year approaches I wanted to highlight a major planning issue for owners of Limited companies.

From the 6 April 2016 the way in which dividends are taxed is changing.  The first £5,000 of any dividend income is to be taxed at 0% with the next £27,000 taxed at 7.5%.  After that dividends will be taxed at 32.5% and anyone with dividend income in excess of £150,000 will see the rate fall to just over 30%.

This is a major change for people receiving dividends as they will see their tax bill increase dramatically compared to previous years.

Many of our clients are deciding to take a large one off dividend from their own company before the 5 April 2016 before the rules change.  This will create a larger tax bill now but it will save tax in the long run as taking the same dividend in 2017 will be much more expensive in tax.

If you need to keep the money within your business you can always loan some money back to the company with no tax implications.  We always suggest that any loan back to the company is after the tax bill has been paid.

I would suggest that you speak to your Accountant as soon as possible to make sure you take advantage of the last chance to use the current rules and minimise your future tax bills.

To find out about how we help our clients pay the right amount of tax please give us a call.  All initial meetings with us are free of charge and with no obligation to you.

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