Tax free dividends are shrinking
January is often a time for planning and thinking ahead, but there’s one tax change coming this year that, with a bit of forward planning, you could get ahead of and save hundreds of pounds…

From 6 April 2018 the level of dividend income received tax-free will be reduced from £5,000 to £2,000. The tax rates applying outside this band remain unchanged. Dividends above the £2,000 threshold will be taxed at 7.5% for basic-rate taxpayers, 32.5% for higher-rate taxpayers, and 38.1% for additional-rate taxpayers.
 
The reduction of the tax-free allowance means shareholders will be worse off by £225, £975 or £1,143 a year, depending on whether they pay tax at the basic rate, higher rate or additional rate.
 
So what can you do? Provided the company has sufficient distributable profits, directors should consider accelerating dividend payments to before 6 April 2018 to benefit from the current dividend tax-free allowance of £5,000 before it falls.

Hargreaves Owen can help with any questions you may have, so for advice tailored to you, give us a call on 01462 791079 or email us at info@hargreavesowen.co.uk.

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